Wall Street Taught Me How to Cheat

A new report finds 53% of financial services executives say ethical standards inhibit career progression.

November 26, 2013  |  

My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father's best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.
The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.
Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.
I never did meet the buyers; that was someone else's job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”
When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.
One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”
I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten "five-point rule": never intentionally make more than five percentage points of profit from a customer.
Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.
They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.
Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.
After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.
Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.
Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them.
By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.
By 2007 the idea of ethics education fell even further. You didn't even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.
As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.
After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.
To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.
I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.
That's the paradox at the core of the settlements we're seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.
A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited. The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.
The excuse we have long accepted is ignorance: that these leaders couldn't have known what was happening. That doesn't suffice. If they didn't know, it's an even larger sin.

Cayman Islands and Costa Rica agree to share bank account details with US

Reuters 
 The alleged tax havens have signed agreements with the United States to tell the IRS about funds held offshore by Americans The United States has signed agreements with the Cayman Islands and Costa Rica to help those countries' banks comply with an anti-tax evasion law starting next year, the Treasury Department said on Friday. The deals are part of the US effort to enforce the Foreign Account Tax Compliance Act (FATCA), which was enacted in 2010 and is set to take effect in July 2014. FATCA requires foreign financial institutions to tell the US Internal Revenue Service about Americans' offshore accounts worth more than $50,000. It was enacted after a Swiss banking scandal showed that 17,000 US taxpayers had hidden substantial fortunes overseas. On Thursday a former UBS banker, Raoul Weil, agreed to be extradited to the US to face charges arising from that scandal. With these two deals, both signed this week, the Treasury has now finished 12 FATCA "intergovernmental agreements" (IGAs), which help countries' financial institutions comply with the law. The FATCA agreement with the Cayman Islands was initially agreed to in August. The island territory of 53,000 people has no income tax and is frequently labelled as a tax haven by critics. It is one of the world's most popular destinations for investment funds to organise for tax purposes..................

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McDonald’s Advice To Underpaid Employees: Sell Your Christmas Presents For Cash

THINK PROGRESS

Tis the season for holiday spirit: Yule logs, egg nog, festive lights and exchanging gifts with loved ones. If you work for McDonald’s, though, be sure to save those receipts.
McDonald’s McResource Line, a dedicated website run by the world’s largest fast-food chain to provide its 1.8 million employees with financial and health-related tips, offers a full page of advice for “Digging Out From Holiday Debt.” Among their helpful holiday tips: “Selling some of your unwanted possessions on eBay or Craigslist could bring in some quick cash.”
Elsewhere on the site, McDonald’s encourages its employees to break apart food when they eat meals, as “breaking food into pieces often results in eating less and still feeling full.” And if they are struggling to stock their shelves with food in the first place, the company offers assistance for workers applying for food stamps.
McDonald’s corporate officers have a history of offering questionable advice to their low-wage workers. Four months ago, the company partnered with Visa to distribute a sample “budget.” In it, the chain suggested that workers needn’t pay for such frivolous expenses like their heating bills, and factored in a monthly rent of $600. To workers living in New York City (home of 350+ stores) and other expensive metropolises, that number is almost comical.
McDonald’s employees are some of the most underpaid workers in the country. The company’s cashiers and “team members” earn, on average, $7.75 an hour, just 50 cents higher than the federal minimum wage. Responding to rising living costs, many stores have staged walk-outs, strikes and protests, demanding a living wage. In Europe, where the minimum wage for employees is $12, customers pay just pennies more than their American counterparts for the same menu items, while the stores themselves typically bring in higher profit margins than ones in the United States.
Of course, McDonalds has shown little willingness to negotiate higher salaries for their poorest workers even as labor rights groups up the pressure. Instead, their website has another piece of advice for people who are stressed about their meager paychecks: “Quit complaining,” the site suggests. “Stress hormones levels rise by 15% after 10 minutes of complaining.”

Oklahoma Drops National Guard Benefits For All Couples To Avoid Serving Same-Sex Couples

THINK PROGRESS

Oklahoma Gov. Mary Fallin (R) announced earlier this month that state-owned National Guard facilities will no longer allow any married couples to apply for spousal benefits, regardless of whether they are same-sex or different-sex. The Supreme Court’s decision overturning the Defense of Marriage Act means that servicemembers with same-sex spouses are now eligible for federal benefits. Fallin’s unusual tactic is designed to avoid having to recognize those couples, which she asserts would violate Oklahoma’s constitutional amendment limiting marriage to one man and one woman:

FALLIN: Oklahoma law is clear. The state of Oklahoma does not recognize same-sex marriages, nor does it confer marriage benefits to same-sex couples. The decision reached today allows the National Guard to obey Oklahoma law without violating federal rules or policies. It protects the integrity of our state constitution and sends a message to the federal government that they cannot simply ignore our laws or the will of the people.

This decision directly contradicts an order from Defense Secretary Chuck Hagel ordering states to provide same-sex couples with the federal benefits they deserve under the law. All married couples will now have to travel to one of the five federal facilities in Oklahoma to apply for benefits. Incidentally, the state’s facilities were built almost entirely with federal funds and 90 percent of the Oklahoma Military Department — which includes the National Guard — is funded by the federal government.
Fallin’s tactic mirrors other attempts to punish an entire group to avoid serving the gay community. When marriage equality came to the District of Columbia, Catholic Charities decided to stop offering partner benefits to all employees to avoid having to provide them to any employee’s same-sex spouse. In various states, Catholic Charities has also abandoned all adoption services to avoid having to provide them to same-sex couples.
Schools have also employed this strategy to try to block gay-straight alliances from forming. In 2011, for example, Flour Bluff Independent School District in Corpus Christi, Texas considered banning all extracurricular clubs to avoid allowing a GSA to form.
Oklahoma is not alone in defying Hagel’s orders. The Texas Military Force acknowledged this week that it will not allow same-sex couples to apply for a housing allowance at state-run National Guard facilities, having already turned away at least one couple. Mississippi, Louisiana, and Georgia have also refused to comply, but some states that previously had balked have begun complying, like West Virginia. A total of 29 states have constitutional amendments banning same-sex marriage, but most are complying with the federal recognition for purposes of the National Guard.
Some states are also struggling in other ways with how to handle the federal government’s recognition of same-sex couples in the wake of DOMA. Missouri Gov. Jay Nixon (D) announced last week that same-sex couples could file their state taxes jointly, even though they won’t be eligible for state tax benefits. This has prompted one Missouri state lawmaker, Rep. Nick Marshall (R), to pursue impeachment proceedings for Nixon. Meanwhile, Virginia is among the states that have ordered same-sex couples to file their taxes separately.

Fox News’ Hasselbeck: Obamacare is hurting ‘many’ elderly pregnant women

RAWSTORY

Fox News host Elisabeth Hasselbeck suggested on Monday that pregnant women 65-years-old and older were losing their doctors because of President Barack Obama health care reform law.
In a segment titled “Who’s Ruining the Economy Now?” Fox Business host Stuart Varney announced that the president was not going to be able to keep the promise that people could keep their doctors because “United Healthcare has just dropped — we don’t know exactly how many — but thousands of doctors have been dropped from United Heathcare’s Medicare Advantage program.”
Conservative media outlets like The Washington Times have blamed United Healthcare’s decision on the Affordable Care Act.
“That leaves hundreds of thousands of patients without the doctor that they’ve had for many many years,” Varney added. “We don’t know how many thousands have been dropped, but thousands have been dropped. What about their patients? What about the people who used to have this doctor who now no longer have this doctor? Broken promise.”
“And many of those people are women who are expecting babies and who may just have a real relationship with their physician and want to see the same doctor deliver possibly their second child,” Hasselbeck opined. “And they are now left in the dark in a time that they feeling quite vulnerable.”
“Most of them are elderly,” Varney pointed out.
Medicare Advantage is a type of Medicare offered by private companies to people over 65 years of age. Medicare Advantage covers traditional Medicare plus additional services, but customers must pay a premium.
It’s not clear how many women over the age of 65 are pregnant, but United Healthcare does offer maternity coverage to Medicare Advantage customers...................

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Qatar stadium design critics: it ‘looks like a vagina’

RAWSTORY

AECOM Technology Corporation posted a short video animation of the design for Qatar’s new Al Wakrah sports stadium Saturday, which under almost immediate criticism for its resemblance to female genitalia.
Buzzfeed’s Matt Kiebus noted that the $120 billion project bears little resemblance to an ancient dhow boat “that Qataris traditionally used for pearl diving.”
Qatar is building the 45,000-capacity stadium to host the 2022 FIFA World Cup. The climate-controlled stadium will be about 12 miles south of Doha, in “one of the oldest inhabited areas in Qatar, with a rich cultural heritage evidenced by its traditional Islamic architecture, historical buildings, distinctive mosques and archaeological sites,” according to AECOM.................

Right wing cyber attacks on Healthcare.gov website confirmed

November 14, 2013

 

Yesterday, the House Homeland Security Committee published a video on their Youtube page highlighting a portion of the committee questioning Roberta Stempfley, acting assistant secretary of the Department of Homeland Security’s Office of Cyber-security and Communications, who confirmed at least 16 attacks on the Affordable Care Act’s portal Healthcare.gov website in 2013.
Roberta Stempfley highlighted one successful attack that is designed to deny access to the website called a Distributed Denial of Service (DDoS) attack. A DDoS attack is designed to make a network unavailable to intended users, generally through a concerted effort to disrupt service such as repeatedly accessing the servers, saturating them with more traffic than the website is designed to handle.
Right wingers have been distributing the link to the necessary tools to perform the attacks on the Healthcare.gov website through social networking, as pointed out by Information Week, and other websites .
The name of the attack tool is called, "Destroy Obama Care!"
"Destroy Obama Care!", that's the advertised name given to the attack tool by "right wing patriots" who are distributing the DDoS tool through downloads on social networks, which promises to overwhelm the Healthcare.gov website.

"This program continually displays alternate page of the ObamaCare website. It has no virus, Trojans, worms, or cookies. The purpose is to overload the ObamaCare website, to deny service to users and perhaps overload and crash the system," reads the program's grammar- and spelling-challenged "about" screen. "You can open as many copies of this program as you want. Each copy opens multiple links to the site."
"ObamaCare is an affront to the Constitutional rights of the people," it adds. "We have the right to civil disobedience!"

Marc Eisenbarth, research manager at the DDoS defense firm Arbor Networks says that the DDoS attack tool has been used in the past to attack perceived political wrongs.

"This application continues a trend Arbor is seeing with denial-of-service attacks being used as a means of retaliation against a policy, legal rulings or government actions," said Eisenbarth.

Some online news sites have talked about this attack tool being distributed by right wingers, and Congress held hearings this week and talked about the attacks, but there is not one mainstream news organization that seems to be interested. But they all continue to talk about the Healthcare.gov website not working as it should, and if it will be ready by the White House's self imposed deadline of December 1, 2013.
And if you watch the attached video of the questioning of Roberta Stempfley, by Rep. Michael McCaul (R-TX), they both are aware of the attacks, but neither mentions the website attack tool, “Destroy Obama Care!”. The Republican asking the questions obviously has the agenda of attacking the Affordable Care Act as all Republicans do, and it would not be in his best interests to mention that people on his side of the aisle are attacking it. And the DHS did not bring it up for obvious reasons of not wanting to advertise the attack tool.
A link to the attack tool “Destroy Obama Care!” was specifically omitted from this report for the same obvious reasons.

WaPo: CBS Ran Misleading Story On HealthCare.gov Security Issues

TPM

CBS News aired a misleading report on Monday about security issues concerning the federal health insurance exchange website based on leaked partial transcripts of a health care official's testimony, according to the Washington Post.
CBS reported that Henry Chao, lead project manager of Healthcare.gov at the Centers for Medicare and Medicaid Services, had been unaware of two major security holes in the website that could lead to identity theft.

"CBS News has learned that the project manager in charge of building the federal health care website was apparently kept in the dark about serious failures in the website's security," the CBS report reads. "Those failures could lead to identity theft among buying insurance."
When questioned by Rep. Gerald Connolly (D-VA) Wednesday at a House Oversight and Government Reform committee hearing, it became apparent that the security flaws that the CBS report discussed could not actually lead to identity theft.
According to Chao, the two modules the CBS report referenced are not currently active on the exchange website and that neither module used peronally identifiable information.
Connolly, while questioning Chao on Wednesday, implied that the partial leaked transcript came from Republican committee staff.
“So when CBS Evening News ran its report based on a leak, presumably from the [Republican] staff, but we don't know — of a partial transcript — excerpts from a partial transcript — they said the security issues raised in the document, and I quote, 'could lead to identity theft among buying insurance,' that cannot be true based on what we established in our back and forth. Is that correct?” Connolly asked during the hearing, as quoted by the Washington Post.
Chao responded that Connolly was correct.

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Why Does Rush Limbaugh Hate Single Women So Much?

TPM

I've been trying to understand Rush Limbaugh's almost pathological hatred of single women. Why would he want to antagonize the 43 million single women in America? We all remember when he called Sandra Fluke a slut, but Thursday morning's rant on the Virginia Governor's race takes the cake.

McAuliffe won a landslide among unmarried Virginians, 62 to 29%. That is huge. And, he was especially big with unmarried women, defeating Cuccinelli 67 to 25%, in unmarried women. Unmarried women are looking at government for everything, and when unmarried women look to government for everything, they find Democrats. ..Basically Obamacare and the entire Democrat agenda basically says to unmarried women, "You are discriminated against, you're treated unfairly, you get taken advantage of, you don't get any relationships. Nobody loves you. You end up having babies that you can't support. The dreaded fathers are never around; they walk out on you. They don't pay their child support; we will. They don't pay your prenatal, your postnatal; we will.

When this rant was over Limbaugh went to a commercial for Tax Defense Partners, one of his biggest advertisers. Limbaugh personal endorsement on their site reads, "Tax Defense Partners are THE experts and the only tax resolution firm I recommend. If you owe $10,000 or more in back taxes, have unfiled returns, or are under audit, they can help." So then the portrait of the Limbaugh listener began to emerge. The show is on from noon to 3 in much of the country. Who is the Dittohead listening to the radio at that time? Is it the retired white male, the housewife, the unemployed, the truck driver, the traveling salesman? Do a lot of them have trouble with more than $10,000 in back taxes from the IRS? According to Quantcast, Limbaugh's audience is 76 percent male and 54 percent over the age of 45, which would account for why single women become the scapegoat for all that ails America.
But all of this raises a troubling question. What is the appeal of Limbaugh's half-baked Ayn Rand "Moochers" rhetoric to a population of poor, older white men with tax troubles? The only analogy I could come up was the history of the Populist Party in the 1890s led by Tom Watson of Georgia. As Wikipedia states, "as a Populist, Watson tried to unite the agrarians across class lines, overcoming racial divides. He also supported the right of African American men to vote." But in the face of this class based politics, the southern Democrats played the race card and appealed to the poor whites to reinstate Jim Crow laws and the Populists lost out. So the question remains, will Limbaugh playing this modern day version of the race card (single mothers being code for "welfare queens") continue to cause poor whites to continually vote for a Republican Party whose real interests lie with the Koch Brothers and the other plutocrats? Or is there a new version of a progressive populism based on the "we are the 99 percent" meme that could counter Limbaugh's demagoguery?
Taplin is a professor at the Annenberg School for Communication at the University of Southern California and the Director of the USC Annenberg Innovation Lab.

Colbert writer sets up Twitter account to mock Fox News ‘sock puppets’

RAW STORY

A staff writer for The Colbert Report has come up with a hilarious way to mock Fox News efforts to counter negative online commentary.
According to a new book by NPR media writer David Folkenflik, the network’s public relations team set up phony accounts to fill comment sections of negative or neutral blog posts with “pro-Fox rants.”
“You have to police the comment section; that’s the most important part of an online article,” said host Stephen Colbert. “It’s the only reason that I know that the ongoing war in Syria is ‘GAAAAAAY!’ (and) ‘Ron Paul 2012!’”
But Colbert noted that “these days, people get their news via the Twitter bird, and Fox can’t police the ‘tweeterverse’ by themselves.”
So staff writer Rob Dubbin designed an algorithm that posts a Twitter comment that combines a positive film review from the website Rotten Tomatoes that swaps out the film names with the names of “beloved Fox News shows and personalities.”
“All references to prophecy and the Antichrist aside,” reads one post based on a review for “The Omen,” “’Shepard Smith Reporting’ achieves its horror the old fashioned way.”
The account, called Real Human Praise, launched last week, and has already posted more than 5,500 tweets, every two minutes.
Colbert said his favorite was this one: “While you’re watching it, Hannity lives up to its title.”

Special Investigation: How Insurers Are Hiding Obamacare Benefits From Customers

TPM

Donna received the letter canceling her insurance plan on Sept. 16. Her insurance company, LifeWise of Washington, told her that they'd identified a new plan for her. If she did nothing, she'd be covered.
A 56-year-old Seattle resident with a 57-year-old husband and 15-year-old daughter, Donna had been looking forward to the savings that the Affordable Care Act had to offer.
But that's not what she found. Instead, she'd be paying an additional $300 a month for coverage. The letter made no mention of the health insurance marketplace that would soon open in Washington, where she could shop for competitive plans, and only an oblique reference to financial help that she might qualify for, if she made the effort to call and find out.

RELATED: What Really Happens To People Whose Insurance Is 'Canceled' Because Of Obamacare

Otherwise, she'd be automatically rolled over to a new plan -- and, as the letter said, "If you're happy with this plan, do nothing."
If Donna had done nothing, she would have ended up spending about $1,000 more a month for insurance than she will now that she went to the marketplace, picked the best plan for her family and accessed tax credits at the heart of the health care reform law.
"The info that we were sent by LifeWise was totally bogus. Why the heck did they try to screw us?" Donna said. "People who are afraid of the ACA should be much more afraid of the insurance companies who will exploit their fear and end up overcharging them."
Donna is not alone.

Across the country, insurance companies have sent misleading letters to consumers, trying to lock them into the companies' own, sometimes more expensive health insurance plans rather than let them shop for insurance and tax credits on the Obamacare marketplaces -- which could lead to people like Donna spending thousands more for insurance than the law intended. In some cases, mentions of the marketplace in those letters are relegated to a mere footnote, which can be easily overlooked.
The extreme lengths to which some insurance companies are going to hold on to existing customers at higher price, as the Affordable Care Act fundamentally re-orders the individual insurance market, has caught the attention of state insurance regulators.
The insurance companies argue that it's simply capitalism at work. But regulators don't see it that way. By warning customers that their health insurance plans are being canceled as a result of Obamacare and urging them to secure new insurance plans before the Obamacare launched on Oct. 1, these insurers put their customers at risk of enrolling in plans that were not as good or as affordable as what they could buy on the marketplaces.
TPM has confirmed two specific examples where companies contacted their customers prior to the marketplace's Oct. 1 opening and pushed them to renew their health coverage at a higher price than they would pay through the marketplace. State regulators identified the schemes, but they weren't necessarily able to stop them......................................