Sunday, March 18, 2012

2 Centuries of utter corruption and Greed, psychopaths on Wall Street and the City of London....

Information is a defense, What connects 2 Centuries of utter corruption and Greed, psychopaths on Wall Street and the City of London....

I think that the salient point in all this, the technical details of percent and depth of psychopathy in the US financial industry aside, is that self-regulation is at best a vulnerable strategy in any human concern involving trust, but is absolute folly in an industry where the emphasis and incentives are based on the ruthless pursuit of performance at any cost, and where such behaviour is lauded.

There is little doubt that strong personality types such as even marginal psychopaths can hijack an organization, a party, or even a sub-culture given the right environment of moral relativism and complacency. And if successful, they bring more of the morally ambivalent and weak-willed along with them.
"I may have made an error in judgement...but one thing is beyond dispute: the man was able to work his way up to leader of a people of almost 80 million... His success alone proved that I should subordinate myself to him."

Adolf Eichmann
The efficient market hypothesis is more a clever cover story than a legitimate scientific observation worthy of consideration in public policy discussions. Transparency and oversight are absolutely essential in all financial matters.

The financial system, and their amoral enablers in politics and the media, have done enough damage to the world. It is time to have a stop.

Harvard Business Review
Psychopaths on Wall Street
by Ronald Schouten, MD, JD
Wednesday March 14, 2012

Psychopaths are the subject of endless fascination. We tend to apply that term loosely to people who engage in bad acts, ranging from pathological lying and repeated deception to major fraud and serial killing. Psychopaths rival pedophiles in the panoply of those we despise and fear. Given this fascination with psychopathy, and the public's current negative view of Wall Street (see Greg Smith's op-ed column in The New York Times about his resignation from Goldman Sachs), it is no surprise that Twitter, the blogosphere, and traditional media have been buzzing about "The Financial Psychopath Next Door," an article in CFA Magazine by Sherree DeCovny (subscription required).

The headline-grabbing factoid in the article was an estimate that 10% of people in the financial services industry are psychopaths. And that's a conservative estimate, according to Christopher Bayer, a Wall Street psychotherapist cited by DeCovny.

DeCovny describes "financial psychopaths" as individuals who seek thrills, lack empathy, don't care about what others think, are charming and intelligent, and are skilled at lying and manipulation. Citing Richard Peterson, managing partner of MarketPsych (a firm that provides psychological and behavioral finance training for the industry), DeCovny notes that these are some of the traits that also predict success on Wall Street.

To understand the implications of all this, it helps to define psychopathy. It is a psychological condition based on well-established diagnostic criteria. These include glibness and superficial charm, conning and manipulative behavior, lack of remorse and empathy, refusal to take responsibility for one's behavior, and others.

Determining whether a person is a psychopath is generally done using a test like the Psychopathy Checklist-Revised (PCL-R), developed by Robert Hare and his colleagues. People who are "normal" invariably score a few points on such scales. True psychopaths score in the top 25%.

Using formal diagnostic criteria, researchers have estimated that about 1% of Americans — about 3 million people — are psychopaths. Based on statistics alone, there are some true psychopaths on Wall Street, as there are in all walks of life. The odds increase further when we consider the competitive advantage that some of the characteristics of psychopathy, including willingness to take risks, can provide in the field.

Psychopathy is mistakenly regarded as an all or nothing affair: you either are a psychopath or you aren't. If that were the case, saying that 10% of people on Wall Street are psychopaths could actually be somewhat comforting, since it implies that the remaining 90% are not and so shouldn't cause us any concern...

But there is good news. First of all, it is possible to screen out almost and full-blown psychopaths during the hiring process and after. Some of the key indicators are:
Glibness and superficial charm
Lack of empathy
Consistent decisions in their self interest, even where it is ethically questionable
Chronic, sometimes transparent lies, even with regard to minor things
Lack of remorse
Failure to take responsibility for their actions, and instead blaming others
Shallow emotions
Ignoring responsibilities
Persistent focus on gratifying their own needs at the expense of others
Conning and manipulative behavior
The only way to deal with a true psychopath is to get him or her out of the organization as fast as possible. While full-blown psychopaths are not deterred by fear and do not learn from punishment, "almost psychopaths" can get the message that adverse consequences will follow misconduct. As a result, strictly enforced firm policies can be effective in deterring those who may be tempted to engage in illicit conduct. As long as the firm wants to deter them.

Read the entire article

What I find most disturbing is that checklist sounds like a screening tool for the Zioconned political candidates....
"This is a ‘bubble ready’ financial system, and will continue to produce bubbles until it is reformed. The financial sector is primarily a wealth transference mechanism. And with the productive economy foundering because of gross mishandling over the past twenty years or more, the sector is transferring wealth from the future of the economy in the form of Treasury debt to the monied interests on Wall Street in the form of asset bubbles, bonuses and fees."

Enjoying Coffee In the Lodge with Jesse by Ilene

I started to think along these lines a few years ago, during the long stock and housing bubble expansion in the stock market that led up to the financial collapse. And we must certainly thank Mr. Greenspan and his Fed for that, as it is clear they knew exactly what was happening. And rather than fulfill their pledge to stop it, they aided and actually promoted it.

What is shocking is that these are no longer rogue operations, no statistical outliers, no isolated dirty dealings by obscure hedge funds.

The moral hazard and decay has progressed so far, has tainted so much, that the US markets are not even worthy to be called casinos, much less capital management and efficient allocation mechanisms.

They have become abattoirs where the real wealth of the nation is taken and slaughtered. These fellows produce nothing, create nothing, except for fraudulent conveyance to take other people's wealth.

There is no better example of this than MF Global, but you can trust your instinct, that there will be more. The blood feast has only begun.

Wait until the wiseguys start skinning their own, those who think they are going to profit from this because they are smarter and better than the rest, and on board. Then you will real some real howls of outrage. I just wonder if there will be anyone left to care.

"Indeed, the market backdrop has regressed to little more than a “money” game. Speculative dynamics rule, and those that play (or associate with those that play) the game the best attain unimaginable financial wealth. How can one reasonably do analysis these days when so much depends on the extent to which global central bankers will proceed further down the path of unlimited “money” creation?

Do you want to bet that the Fed (and ECB, BOE, BOJ, PBOC, etc.) is largely through its crisis-induced money creation operations? Or is the Fed’s balance sheet on the way to $10 TN? Those provide two altogether different scenarios to contemplate.

Clearly, with central bankers propping up markets with Trillions of liquidity injections, one can toss traditional analysis (and market participant behavior) out the backdoor."

Doug Noland,
Credit Bubble Bulletin
Francine McKenna writes the blog, Re: the Auditors. I like her writing quite well, as it is clear and concise, and enjoy the depth of understanding of the accounting profession she brings to bear on the issues of the day.

In this guest post at the blog
BankThink of The American Banker she illuminates the ongoing mistreatment of the MF Global customers whose money was stolen three times: once by MF Global, a second time by MF Global's Banker, and a third time by Banks and Funds with special access to information through the financial system.

What she is adding to what others, including myself, have said is the linkage she draws between the Banks and the MF Global collapse via their common auditors.

I suppose we cannot blame the Big Wall Street Banks, because as the recent Greg Smith resignation incident has shown, they are in the business of cheating their customers at every opportunity. In fact, one could say that cheating through the hiding and manipulation of information and the subversion of the rules is their stock in trade.

Although as the financial press was quick to point out it can't be called cheating because everyone who is not a naive fool should know what they are doing, and keep both hands on their wallets, and trust nothing that the Banks or Wall Street, or their enablers in the press and the government, say. The favorite rationale of last resort on the Street is your own foolish trust. After all, no one made you do business with them. No one made you buy that fraudulent instrument. No one made you deposit your money with a proto-criminal enterprise. So be a good Muppet and shut up and pay up.

They are doing God's work. It was our mistake to assume that we knew which god it was that they are serving. They serve Mammon, and themselves, for they would be as gods.

The real shame of this is with the regulators, who were hired by the customers to protect them. Not by the industry, not by the corporations, but by the people, for it is still a government of, by, and for the people, at least on paper and for now.

That is what they are paid to do, and the oath which they have sworn to uphold....?

Banks with Inside Track Take Advantage of MF Global Mystery
By Francine McKenna
March 16, 2012

...All parties have practiced misdirection. The trustees, the regulators, and the investigators from the FBI and U.S. Attorney's office dole out anonymous updates to reporters with the goal, I suppose, of attracting more information, buying time, or preparing customers for the worst.

There is one thing we know for sure. Some banks must know where the missing customer funds are.

Otherwise why would they be so sure that customer claims will be paid in full and paid soon that they're bidding as much as 90% of face value for the claims?

"These banks are so confident that they’re buying the claims for their own account, not resale," says Barry Slotnick, a white-collar defense lawyer and a partner at Buchanan Ingersoll & Rooney PC who's not involved in the case.

The New York Times has reported that Barclays, the Royal Bank of Scotland and Seaport Group, a firm that specializes in distressed assets, "are all scrambling to buy MF Global customer claims." Barclays has agreed to purchase most claims for 90% of face value and RBS says it will pay 91% for the claims of institutions (but not those of individuals). Seaport is adding something else: $200,000 to help fund the Customer Commodity Coalition, a group of MF Global clients led by attorney James Koutoulas, who negotiated the offers. Other banks willing to buy claims include Credit Suisse, which was offering more than 80%, and Deutsche Bank, offering 89%.

I think the banks know something the rest of us don't know. They certainly have windows on the situation not available to the general public.

Barclays, for example, is audited by PricewaterhouseCoopers, which happens to have been MF Global’s auditor. The British bank is also no stranger to the problem of keeping customer assets secure. The U.K. Financial Services Authority recently fined Barclays Capital £1.12 million for failing to protect and segregate client money held in sterling money market deposits.

Credit Suisse, meanwhile, is audited by KPMG, the professional services firm that is also running the MF Global bankruptcy in the U.K., Canada and Singapore.

Deutsche Bank is a creditor in the MF Global Chapter 11 proceedings due to its role as the indenture trustee for four different bond issues. Next to JPMorgan Chase, Deutsche Bank is the most important non-customer creditor of MF Global. As a member of the creditors committee, Deutsche is privy to information customers do not have....

Francine McKenna writes the blog re: The Auditors, about the Big Four accounting firms. She worked in consulting, professional services, accounting and financial management for more than 25 years.

Read the rest

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