Dirty money

Record fines for currency market fix - BBC News

Five of the world's largest banks are to pay fines totalling $5.7bn (£3.6bn) for charges including manipulating the foreign exchange market.

Four of the banks - JPMorgan, Barclays, Citigroup and RBS - have agreed to plead guilty to US criminal charges.

The fifth, UBS, will plead guilty to rigging benchmark interest rates.

Barclays was fined the most, $2.4bn, as it did not join other banks in November to settle investigations by UK, US and Swiss regulators.

Barclays is also sacking eight employees involved in the scheme.

US Attorney General Loretta Lynch said that "almost every day" for five years from 2007, currency traders used a private electronic chat room to manipulate exchange rates.

Their actions harmed "countless consumers, investors and institutions around the world", she said.

Separately, the Federal Reserve fined a sixth bank, Bank of America, $205m over foreign exchange-rigging. All the other banks were fined by both the Department of Justice and the Federal Reserve.

Cartel threat
Regulators said that between 2008 and 2012, several traders formed a cartel and used chat rooms to manipulate prices in their favour.

One Barclays trader who was invited to join the cartel was told: "Mess up and sleep with one eye open at night."

Several strategies were used to manipulate prices and a common scheme was to influence prices around the daily fixing of currency levels.

A daily exchange rate fix is held to help businesses and investors value their multi-currency assets and liabilities.

US Attorney General Loretta Lynch said traders had colluded for five years
'Building ammo'
Until February, this happened every day in the 30 seconds before and after 16:00 in London and the result is known as the 4pm fix, or just the fix.

In a scheme known as "building ammo", a single trader would amass a large position in a currency and, just before or during the fix, would exit that position.

Other members of the cartel would be aware of the plan and would be able to profit.

"They engaged in a brazen 'heads I win, tails you lose' scheme to rip off their clients," said New York State superintendent of financial services Benjamin Lawsky.

The fines break a number of records. The criminal fines of more than $2.5bn are the largest set of anti-trust fines obtained by the Department of Justice.

The £284m fine imposed on Barclays by Britain's Financial Conduct Authority was a record by the regulator.

Meanwhile, the $925m fine imposed on Citigroup by the Department of Justice was the biggest penalty for breaking the Sherman Act, which covers competition law.

The guilty pleas from the banks are seen as highly significant as banks have settled previous investigations without an admission of guilt.

Hillary

Speaking to about 60 supporters at a house party in Iowa, Clinton said "the deck is still stacked in favor of those at the top" like chief executives and hedge fund managers.

"In fact, I heard a statistic the other day that really made a big impact on me. The top 25 hedge fund managers together make more money than all the kindergarten teachers in America," she said.

Clinton, the Democratic front-runner for the presidential nomination in 2016, has previously criticized hedge fund managers as examples of the income disparity she says she wants to end.

Avon stock manipulation

That’s the lesson of yesterday’s debacle for Avon Products AVP, the door-to-door cosmetics company that has been a regular subject of takeover talk. Shortly before noon on Thursday, an investment firm calling itself PTG Capital filed a document with the SEC, saying that it had offered to acquire Avon for $18.75 per share. It did not also issue a press release or use any other third party for distribution. Just the SEC’s EDGAR platform.

For context, Avon shares had been trading at around $6.50 prior to the news. Once the filing hit, however, the shares began to surge – climbing nearly 15% before the NYSE halted trading. Pretty soon, media outlets (including us at Fortune) were raising alarm bells over the supposed offer. No one had ever heard of PTG Capital before, nor did the firm seem to exist via Google or LinkedIn searches. Moreover, boilerplate in the filing twice referred to the acquirer as “TPG Capital” – suggesting that it had cribbed the language.

Also not seeming to exist was PTG’s Texas-based law firm. Neither the listed phone numbers nor addresses were legitimate. About an hour and a half after the filing first hit, Avon put out a press release saying that it had not received any takeover offer, and that it couldn’t verify PTG’s existence.

Most likely, this was a stock manipulation scam. Someone owned Avon stock, filed the bogus document and sold when shares spiked.

The richest school

Harvard’s in-house fund managers get 70 pct pay hike
By Richard Valdmanis
By Richard Valdmanis

CAMBRIDGE, Massachusetts, May 14 (Reuters) - Harvard, the world's richest university, said on Thursday it paid its six in-house money managers a combined $49.3 million in 2013, up more than 70 percent from the previous year, citing the team's "outperformance" in growing its endowment fund.

The team oversaw an investment return of 15.4 percent for the Ivy League school's endowment during the fiscal year ended June 30, 2014, bringing it to $36.4 billion, or roughly the size of an average country's annual gross domestic product.

Bernanke attends SALT dinner

Bernanke said that early on during the financial crisis, he and others at the Fed were perhaps too optimistic about the severity of the damage that the housing bust and bad lending would inflict on financial markets and the economy. He said the economic recovery was on the right path, that there were no signs of deflation, and that the Fed would be able to exit the bond buying stimulus plan that he initiated, so-called quantitative easing, with no damage to the economy. Others have worried about what will happen when the Fed has to unload all of its bonds.

Along with the speech, Bernanke attended a private dinner, hosted by Scaramucci, for conference attendees. Fortune has learned that hedge fund billionaire Leon Cooperman, General David Patraeus, and William Daley, the former White House chief of staff, attended the dinner, which was closed to the press.

Germany does what it wants

Germany’s current account surplus is out of control. The European Commission’sSpring forecasts show that it will smash all previous records this year, reaching a modern-era high of 7.9pc of GDP. It will still be 7.7pc in 2016.

Vague assurances that the surplus would fall over time have once again come to nothing. The country is now the biggest single violator of the eurozone stability rules. It would face punitive sanctions if EU treaty law was enforced.

With a few honourable exceptions - such as Mr Fratzscher – the German policy elites refuse to acknowledge that there is anything wrong with their surplus policy, or even that there is any need to discuss the subject at all.

This refusal to view matters from anybody else’s point of view is testing patience around the world. Germany has displaced China as the arch-villain in the US Treasury’s reports to Congress on currency manipulation, and for obvious reasons.