Here are a couple of links you should have a look at, courtesy of Pleiades.
This one is on Dick Fuld, the 'mastermind' behind the Lehman Brothers collapse.
Fuld had made a lot of people fabulously rich – shareholders, employees and of course himself. In the eight best years he had taken home a cool $300m – funding five residences, his wife Kathy’s passionate interest in modern art and a host of philanthropic activities.
To say he was surrounded with a cult of personality would be an understatement. He was the textbook example of the “command-and-control CEO”. More than that, to many employees and to the outside world, he was Lehman Brothers – his character inextricably intertwined with the firm’s.
Fuld inspired great loyalty and, on occasion, great fear. Those closest to him slaved like courtiers to a medieval monarch, second-guessing his moods and predilections, fretting over minute details of his schedule down to the flower arrangements and insulating him from trouble – from almost anything he might not want to hear.
His ferocity could be intimidating, his eyebrows beetling tight over his hard eyes, his brutally angular brow appearing to contort in rage. He would regularly upbraid colleagues for minor wardrobe malfunc-tions – in Dick’s book, that tended to mean anything other than a dark suit and a white shirt or, in my case, a beard. “Are you off to the country club?” he would grunt dismissively at a senior executive committee member who looked just a tad too casual.
Even when in a relatively upbeat mood he seemed to take pleasure in violent imagery. Lehman was “at war” in the market, he would say. Every day was a battle, employees were troops. At an investment banking conference in London last spring, I saw him astonish several hundred of his managing directors with a blood-curdling threat aimed at investors who were selling Lehman shares short – depressing the price.
“When I find a short-seller, I want to tear his heart out and eat it before his eyes while he’s still alive,” the chairman declared. Histrionics, maybe – but with a purpose. Fuld had used this aggression to consolidate his reputation as the most successful chief executive in the banking business and one of the most respected corporate leaders in America. But the style also contained the seeds of disaster. It meant that nobody would or could challenge the boss if his judgment erred or if things started to go wrong.
So he was a class A sumbitch and an A-Hole deluxe. We get that. His adjutant sounds like an equally unsavory character and between them, they're still rolling in the dosh.
Which brings us to this one abou the Royal Bank of Scotland's top execs getting their bonuses apropos of the British bailout.
UK Financial Investments (UKFI), the Treasury-run body that holds the Government’s controlling stake in RBS, is understood to have given its blessing in principle to limited payments, although it has yet to see the details. “There’s no blanket objection to bonuses, but they are subjecting them to intense scrutiny,” said one well-placed source. “The [bonus] numbers will be very large and very difficult for the general public to understand.”
The investment banking arm of RBS, a division known as global banking and markets (GBM), paid out £1.83 billion to employees in 2007, most of which is thought to have been bonuses. Although the proposed bonuses will be much lower this time, RBS still plans to go ahead with them.
The bank, now 68 per cent-owned by the Government, is due to report its 2008 results in three weeks, when it will confirm a loss of between £7 billion and £8 billion, after which it wants to pay the bonuses.
John McFall, the chairman of the Commons Treasury Select Committee, said: “Some of these banks are living in the shadows, thinking that life will resume as it was in a few years’ time. But life has changed and they need to face up to it. A reality check is required.”
Stephen Hester, the new chief executive of RBS, is understood to be acutely aware of the sensitivity of paying bonuses and is considering paying most if not all of them in RBS shares. A plan to set a cap on payments is also being considered.
Talk about a jolly bad show. Over in America, President Obama has capped the executive salaries for the firms that have accessed TARP funds. This is by the way, a section of his remarks:
We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses. As I said last week, that's the height of irresponsibility. That's shameful. And that's exactly the kind of disregard for the costs and consequences of their actions that brought about this crisis: a culture of narrow self-interest and short-term gain at the expense of everything else.
This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset – and rightfully so – are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.
For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis is not only in bad taste – it's a bad strategy – and I will not tolerate it as President. We're going to be demanding some restraint in exchange for federal aid – so that when firms seek new federal dollars, we won't find them up to the same old tricks.
As part of the reforms we are announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 – a fraction of the salaries that have been reported recently. And if these executives receive any additional compensation, it will come in the form of stock that can't be paid up until taxpayers are paid back for their assistance.
Well I'll be damned. A President who actually echoes the sentiment of the man on the street perfectly. It's not about more bleeding tax cuts or whether it's right or wrong to intervene. The interventions have been made an will continue to be made, mostly out of necessity. So it's about time they stopped rewarding the fat cats that drove the whole system into the ditch.
That's certainly change I can put faith in.
Explaining How Madoff Made Off
Meanwhile, there are hearings going on as to just how Madoff was able to run his Ponzi scheme for so long.The star witness Harry Markopolos testified and he had a few blunt words about the SEC. Here's a cool account.
Markopolos said Madoff was earning 82% of the S&P 500's return with less than 22% of the risk, but his returns only had a 6% correlation when Markopolos expected "something like a 50%" correlation. "If your returns are coming from the S&P 100 stock index, you better at least resemble that stock's performance," he said. He also compiled statistics from S&P 100 index options and from the Chicago Board Options Exchange as reported in financial media. "There were not enough index options in existence for Madoff to be managing the split strike conversion strategy he purported to be running," he said. But the biggest tip-off of a fraud was that Madoff reported his fund was down only three months out of 87, whereras the S&P 500 was down 28 months during the same period.
Markopolos described the crooked returns as "the equivalent of Major League Baseball player batting .966 and no one suspecting a cheat." In the hearing, he used his arm to show the straight upward growth of Madoff's funds, up 45 degrees without any down ticks. "This was the first sign that this was a fraud," Markopolos said.
The independent investigator said Madoff's fraudulent fund was in the $3 billion to $7 billion range in 2000, then a year later grew to near $20 billion, and then eventually to its reported $50 billion in late 2008. He said there were at least 14 feeder funds.
Madoff's greatest talent, the witness indicated, was his use of a "hook" or lure to play "hard to get" and the false security of exclusivity, a hallmark of a Ponzi scheme.
In a story that seemed part financial doctoral thesis and part financial thriller, Markopolos told of his years of toil on the Madoff case, with often "disastrous meetings" with SEC enforcement chiefs. It was in 2005 when Markopolos wrote his now famous and lengthy report detailing Madoff's giant Ponzi scheme and pointing out 29 red flags. He sent it to the SEC, and nothing happened. But when he finally met the SEC's Boston branch chief, Mike Garrity, who had a willingness to "think outside the box," he felt some hope.
Garrity, he said, understood Madoff's impossible returns, but the problem was location: Madoff was not in the New England region. Were jurisdiction not a problem, "he would have had an inspection team inside Madoff's operation the very next day," Markopolos said. Ed Manion, a 15-year SEC-certified financial analyst, also urged Markopolos to continue his investigation. Manion, he said, was the "only one who understood [Madoff's] threat to the public."
Unfortunately, Markopolos said, his report was sent down to the SEC's New York branch chief Meaghan Cheung, whom he said "never grasped" the concepts "nor was the slightest bit interested in asking questions."
At that point, Markopolos decided to go to the press. He told the committee he went to a reporter at the Wall Street Journal, John Wilke, but the editors never approved an investigative piece, so things went back to the SEC's Cheung, and there it stopped. "It is a sickening thought," but if the SEC or the Wall Street Journal "would have picked up the phone and spent one hour contacting the leads" provided, Markopolos said, Madoff would have been stopped in 2006, and "untold billions" would have been saved.
I can just imagine a blinking SEC person, trying to grasp just how far-reaching the Madoff scheme might be, as this guy Markopolos told her - and she probably went into immediate denial. It's entirely possible she thought, "no, this can't be right. This Markopolos person couldn't possibly be right."
Or she was plain incompetent. :)
Either way, her name is in the press now , so I imagine she's deep in the shit. Heck, she gets no sympathy from me.
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