Horrors of late capitalism

[Estreeter]

Originally Posted by xyzde69

But youngest generations are better informed now.
I've recently listened in the train... four female teenagers thinking becoming vegans, because the nicest boy of the class was vegan and explained to them what really happened in brutal camps called "farms".

See, I'm gonna disagree again Teenage girls eh That's automatic silly and at the right age where boys are important Maybe, just maybe they're physically attracted to him and want to impress him so that they could be the first to suck his dick and get meat in their mouth

[footstep]

Big John ' breaking news :

[Roubignol]

I just watched a documentary about Lehman Brothers bankrupcy from the perspective of BNC mortgages employees, who explained the massive cases of frauds that created the toxic funds.
Financial lawyers also explain how Lehman hide the toxic funds during the last years.

In fact... the fraud was discorved thanks to few brave whistleblowers.

Link in French of the documentary is here: Inside Lehman Brothers
There is a german version too.

Here are several observations made on slides at the end of the documentary.

The boss of Lehman Brothers, Richard Fuld never was condamned. In 2009 he even created a new wealth management business. "We see real opportunities in a very fragmented and imperfect financial sector."

In 2017, 31 billion US dollars bonuses were distributed in Wall Street.
A record never seen since Lehman Brothers bankrupcy.

Subprimes are back in the US. They only get a new name: Alternative lendings.
Sector is growing fast.

[deepsepia]

Originally Posted by xyzde69

I just watched a documentary about Lehman Brothers bankrupcy from the perspective of BNC mortgages employees, who explained the massive cases of frauds that created the toxic funds.
Financial lawyers also explain how Lehman hide the toxic funds during the last years.

In fact... the fraud was discorved thanks to few brave whistleblowers.

Link in French of the documentary is here: Inside Lehman Brothers
There is a german version too.

Here are several observations made on slides at the end of the documentary.

The boss of Lehman Brothers, Richard Fuld never was condamned. In 2009 he even created a new wealth management business. "We see real opportunities in a very fragmented and imperfect financial sector."

In 2017, 31 billion US dollars bonuses were distributed in Wall Street.
A record never seen since Lehman Brothers bankrupcy.

Subprimes are back in the US. They only get a new name: Alternative lendings.
Sector is growing fast.

I strongly recommend not watching documentaries about complex quantitiatve subjects - - they invariably glib and light on analysis. If you’re going to understand the financial crisis, you’re going to have to get far more analytical than a documentary can be.

Lehman Brothers went broke for the shocking reason that they were leveraged 40 to 1. That’s not a crime, but it is plenty stupid. Note that Fuld himself had much of his wealth in Lehman Brothers stock - the most obvious consequence of his mismanagement is that he lost most of his own money.

As to subprime, all those are are loans to less creditworthy borrowers. In general, we _want_ lenders to lend to poorer people. That’s not intrinsically a bad thing. Misrepresenting or misevaluating these loans as being of better quality than they are is hardly surprising at the end of a long bull market.

That’s one of the observations of the great economist, Hyman Minsky: extended stability essentially produces instability. People look at things which appear risk free because nothing bad has happened recently, and extrapolate that safety into the future. So Lehman thought loans to C credits would perform better than they did, and European bankers thought Greek debt was almost as good as German. That’s a mistake, not a crime.

So there’s a ton of debt out there, and it’s sure as the sun comes up that sooner or later it will create a new crisis. When? If you knew that you could make a billion . . . No one knows, or can know. We’ve got little debt crises in emerging markets - Turkey for example, but whether that’s just a summer storm or the start of something bigger, who knows ?

[Roubignol]

Originally Posted by deepsepia

I strongly recommend not watching documentaries about complex quantitiatve subjects - - they invariably glib and light on analysis.

But in that documentary there are testimonials of:

Anton Valukas : Lawyer and author of the official report on the Lehman Brothers bankrupcy.

He explains how Lehman used a trick to hide each time 50 billions dollars of toxic funds just before the quarterly report.
This trick was called: Leverage - Repo 105

and among the whistleblowers:

Matthew "Repo 105 whistleblower" Lee : Vice-President Senior, Finance Division of Lehman Brothers.
Oliver Budde : Former vice-President, Legal Division of Lehman Brothers.

Don't you think that we can't trust these people ?

50 billion US$ of debts fraudulently hidden. That's a colossal fraud.

“It was clearly a dodge…. to circumvent the rules, to try to move things off the balance sheet,” says Wharton accounting professor professor Brian J. Bushee, referring to Lehman’s Repo 105 transactions. “Usually, in these kinds of situations I try to find some silver lining for the company, to say that there are some legitimate reasons to do this…. But it clearly was to get assets off the balance sheet.”

.

[deepsepia]

Originally Posted by xyzde69

But in that documentary there are testimonials of:

A complex subject, reduced to a quote without any associated documentation, means little.

Tell me: do you know how to read a balance sheet?

Have you ever taken an accounting class?

Do you have any idea what Repo 105 was? Or just how complex the accounting processes are for characterizing repurchase transactions? Repo is a massively complex subject, and there are all sorts of technical and legal arguments about it.

Originally Posted by xyzde69

50 billion US$ of debts fraudulently hidden. That's a colossal fraud.
.

The claim of fraud was made in a lawsuit by the [then] New York State Attorney General Andrew Cuomo brought against the auditors, Ernst & Young in 2010. Essentially, the Repo 105 allegation is that Lehman should have been showing slightly more debt on its books than it did . . . I agree with that, but whether that's "fraud" is hard to say.

Its plain that the State didn't have the evidence to support this charge, as after five years of litigation and document discovery, the State settled for a token settlement by Ernst and Young, with no admission of any liability.

E&Y paid a small fine -- less than the cost of litigating a complex case like this-- and admitted nothing.

No discussion about a financial collapse is worth your time without a discussion of a firm's balance sheet, its assets and its liabilities, and this is impossible to do in a video. Its an analysis that requires numbers on paper . . . and very quick summary of Lehman's collapse is "they borrowed far too much money". They were levered 31 to 1; banks today are levered about 12 to 1 . . . at the levels of leverage that Lehman was employing, any small hiccup would sink them, which is just what happened.

Criminal? No . . . they sank their own boat, with all their own wealth. It was basically just stupid.

[Roubignol]

Originally Posted by deepsepia

Do you have any idea what Repo 105 was? Or just how complex the accounting processes are for characterizing repurchase transactions? Repo is a massively complex subject, and there are all sorts of technical and legal arguments about it.

Repo 105 is explained on the following link by Matthew Lee : Vice-President Senior, Finance Division of Lehman Brothers. (In French but you can understand the American comments).

https://youtu.be/3Uw-bDEl5FE?t=54m42s

It's easy maths. Plus minus. Nothing else. Nothing was sold. It only was a transfer of toxic funds from US subsidiary to the British subsidiary and after the publication of the quaterly report, they were transfered back to the US subsidiary...

As the Attorney Mr. Valukas explains: "It was a gimmick." [to lie to the market].

It was a lie.

It's like if you decide to have sex without condom with a partner, but you first want to be sure that she has no AIDS.
She knows that she has AIDS, but presents you a fake medical document made by herself declaring : "She's in good health."
You feel secure, finally have sex with her without wearing condom and... few weeks later you catch AIDS.

That's Lehman Brothers fraud to get more funds.

Just a shame that you don't speak French or German, because all the story was a disgusting fraud.
When some whistleblowers of BNC Mortgage said that there were massive amount of files that were illegally manipulated, they were threatened to be killed.

I recommand English people to find this documentary in English version.

Obama could have cleaned the system, but didn't.
He put a guy of the Deutsche Bank, one of the most implicated bank during the crisis, to do the investigation on Lehman Brothers at the SEC.
According to Oliver Budde (Former vice-President, Legal Division of Lehman Brothers) that's why Lehman Brothers never was charged because of Repo 105.

[deepsepia]

Originally Posted by xyzde69

It's like if you decide to have sex without condom with a partner, but you first want to be sure that she has no AIDS.
She knows that she has AIDS, but presents you a fake medical document made by herself declaring : "She's in good health."
You feel secure, finally have sex with her without wearing condom and... few weeks later you catch AIDS.

You can't discuss a technical matter of accounting by means of a silly analogy to "AIDS"

Either you engage the accounting rules or you don't have anything to say.

Originally Posted by xyzde69

That's Lehman Brothers fraud to get more funds.

Made very little difference. People were throwing money at these companies. Lenders made the choice to lend a lot of a money to a very heavily indebted company. That's dumb.

Originally Posted by xyzde69

Just a shame that you don't speak French or German, because all the story was a disgusting fraud.
When some whistleblowers of BNC Mortgage said that there were massive amount of files that were illegally manipulated, they were threatened to be killed.

I recommand English people to find this documentary in English version.

I would recommend that they read the original documents which are all in English, and that they read documents, rather than watch Youtube videos.

I've read the original documents, which are all in English.

And your understanding is largely incorrect.

Again, the NY State Attorney General brought a case against Ernst and Young, the auditors who actually certified that these transactions complied with GAAP ("Generally Accepted Accounting Principles") -- with grand claims about "fraud"

They settled the case for $10 million -- less than the cost of litigating a case as complex as this-- with no fault admitted by E&Y, because the State couldn't prove the charges.

Again, the folks who lost the most at Lehman were the executives of the company, who had invested very heavily in the company.

Its difficult to say that something is a "fraud" if the perpetrator himself invests his own life savings in it. Clearly Lehman executives believed their company was solvent up to the last.

[Arturo2nd]

Originally Posted by deepsepia

Either you engage the accounting rules or you don't have anything to say.


Again, the NY State Attorney General brought a case against Ernst and Young, the auditors who actually certified that these transactions complied with GAAP ("Generally Accepted Accounting Principles") -- with grand claims about "fraud"

I have an MBA in accounting and spent nearly 30 years in the profession. I doubt that most lay people understand the extent that U.S. GAAP can be manipulated to conceal and abet fraud. The accounting profession is not blameless here, but to its credit has regularly pushed for increased accuracy and transparency only to be met with push back from industry and Congress.

One of my main beefs with the Republican party is undercutting regulatory agencies and greatly reducing the enforcement staffs of agencies like the SEC. Of course, we always face the systemic problem that the really smart financial minds are attracted to high paying industry jobs, leaving lesser minds to fill the enforcement ranks.

I am sure that the public remains unaware that most of the control mechanism built into our financial systems are contained in the private sector. For example, the bond rating agencies charge fees to evaluate proposed bond issues. Again, these agencies do not pay well enough to attract the best and the brightest and failed badly in detecting the risks of the mortgage backed bonds and derivatives based on those bonds during the first decade of this century.

Also, the public misconstrues the role and powers of auditors. Financial auditors only certify that financial statements are prepared in accordance with generally accepted accounting principles. CPA firms rely on the companies to prepare honest statements and provide honest evidence in support of the statements. Every so often the auditors will detect chicanery and refuse to endorse a company's financial statements. A weakness in the system of private regulation is that the company pays the auditors to review and certify the statements. This places enormous pressure on the auditors of large firms to sign off on the companies representations, because fees will run into millions of dollars. Moreover, the accounting firm rewards the managers of its auditing team with a portion of the fees as bonuses. We saw how this can fail when Arthur Anderson had its auditors seduced by Enron executives into certifying fraudulent statements. The result was thousands of damaged investors and the demise of one of the oldest and most highly respected accounting firms.

I spent many years doing intercompany accounting and consolidating accounting statements. I became familiar with financial statements from all around the world and the regulatory environments created by various governments. British and American treatments are very influential, but many governments believe that business people will attempt to deceive them and evade taxes. Thus, many U.S. GAAP treatments are outlawed overseas and the reporting is mostly done on a cash or pay-as-you-go basis. (Value Added Taxes (VAT) for example, is pay now and claim your credit against future taxes. I call it a governmental Ponzi scheme, but governments need tax funds to provide services.)

There is an ongoing effort to reconcile accounting philosophies into internationally accepted accounting principles. The process is slow going, but I predict that U.S. corporations will gradually be forced into accepting greater simplicity and transparency, which will trickle down into smaller firms. There are distortion and timing problems in all accounting systems. But I always remember my first accounting teacher's dictum, "Controls are there to keep honest people honest."

[Roubignol]

Originally Posted by deepsepia

You can't discuss a technical matter of accounting by means of a silly analogy to "AIDS"

What disturb you with this excellent analogy ?
I observed one thing... you defend manipulated balance sheets, when even Vice Presidents of Lehman Brothers prefered to quit this bank, because they thought it clearly was illegal.

As pointed by Vice Presidents and attorney in this documentary, the SEC had not made its job during years until the fair vice-presidents of Lehman Brothers denounced the cases.

Even Mr. Lee says: "I didn't really trust the SEC."
He finally wrote a letter explaining that there was a problem of ethics and justice.
He brought it at 4 higher members of his hierarchy.
The result... he was fired.

But his letter arrived in the hand of Mr. Valukas.
When Mr. Valukas and his team analyzed 30 million documents, they observed that the SEC and the US Central bank had put employees directly at Lehman Brothers.
Lehman Brothers had given all the documents that these institutions requested.

According to Mr. Valukas, the SEC and the Federal governement knew the risks in real time. They get all the documents, but have done.... nothing.
One day an attorney of the SEC wrote a mail: "Look at this, that could bring a problem."
And the day later... Lehman Brothers was bankrupt.

As ex-employees of BMC mortages said: "Lehman Brothers chiefs went away with a huge part of the money thanks bonuses and let the debts to the borrowers."

Don't tell me that's fair.
It's exactly like my AIDS analogy.
The infected prostitute, thanks to a gimmick, take your money and let you the disease.
That's the materialistic reality.

Originally Posted by Brian249x

But I always remember my first accounting teacher's dictum, "Controls are there to keep honest people honest."

The Lehman Brothers story shows how our Capitalist societies are viciously corrupted by a greedy plutocracy.

They are like prostitutes producing fake documents about their sexual diseases to pick up money to honest but uninformed customers.

As shown in the documentary, if US borrowers had known that their informations would have been manipulated by brokers of mortgages agencies, to be thrown outside of their houses to the street as homeless a few years later, surely they never would have signed their contracts.


That's utterly disgusting and the US government has defended and maintained this system.
There were other alternatives far more fair to save the Capitalist system as explained by Pr. Frédéric Lordon, like helping the American borrowers under the conditions they put back their state financial helps into the banks in which they were in debts with.
American borrowers could have stayed at home and work to reimburse their debts directly to the state.
No... US plutocracy had decided to help the banks and let borrowers in the street.

USA government is in very bad hands and few American people seem to understand that, because they were manipulated at school since their childhood.