Tuesday, December 22, 2009

ABCP culprits get off at 10 cents on the dollar?

Today we learn that the banks get hit with measly fines of some $134 million for their role as the masterminds of the ABCP house of cards/elaborate cheque kiting scheme of a product offering.

Meanwhile taxpayers get stuck with a potential loss of over $1 billion from the ABCP fiasco these banks created. What’s wrong with this picture? Why are taxpayers left holding the bag for the bank’s gross mistakes and misrepresentations to investors, and the Banks get off at 10 cents on the dollar? Where is the justice in that?

Meanwhile Flaherty's resolution of this ABCP matter via a taxpayer bailout also means that the banks gain immunity from civil prosecution and civil lawsuits?

These banks could get away with murder, the way this country is run.

CIBC, Brokerages, to Pay C$134 Million Sanctions in ABCP Probe
By Doug Alexander and Joe Schneider

Dec. 22 (Bloomberg) -- Canadian Imperial Bank of Commerce, National Bank of Canada and brokerages agreed to pay a total of C$134 million ($126 million) in fines and penalties to settle regulators’ claims they improperly sold asset-backed commercial paper in Canada just before the market collapsed in 2007.

National Bank was fined C$70 million by Quebec regulators and will pay C$1 million for the cost of the investigation, while CIBC, Canada’s fifth biggest bank, was fined by Ontario regulators C$21.7 million and will pay C$300,000 in costs.

Bank of Nova Scotia’s Scotia Capital unit will pay a total of C$29.3 million, according to an agreement approved by the Investment Industry Regulatory Organization of Canada. Laurentian Bank will pay C$3.2 million.

The banks agreed to settle for their roles in selling commercial paper in late July and early August of 2007, before the market collapsed on concern about ties to U.S. subprime mortgages. About C$32 billion of the debt became insolvent, leading to a court-ordered plan in which the short-term debt was swapped for longer-term notes in Canada’s biggest restructuring.

“CIBC engaged in conduct contrary to the public interest by failing to adequately respond to emerging issues” in the ABCP market, Ontario Securities Commission Vice Chairman James Turner said, following a hearing in Toronto yesterday.

Rob McLeod, a spokesman at CIBC, declined to comment.

Employee Failure

The settlement “reflects the failure of a small number of employees, handling a small number of large trades,” Scotiabank said in an e-mailed statement. The bank is “taking additional measures to prevent this from happening again.”

Securities regulators in Ontario, Quebec and British Columbia have been collaborating on a probe with the Investment Industry Regulatory Organization of Canada, OSC spokeswoman Carolyn Shaw-Rimmington said in July. The investigation focused on the actions of firms selling the debt after Coventree Inc., Canada’s biggest commercial paper administrator at the time, warned bank-owned dealers of ties to risky U.S. loans.

The OSC also approved a settlement with HSBC Bank of Canada under which the bank agreed to pay a fine of C$5.925 million and C$75,000 in costs. Canaccord Financial Ltd., a brokerage based in Vancouver, agreed to pay IIROC a fine and costs of C$3.1 million and Credential Securities Inc. will pay C$200,000 in fines and costs.

In a July 2007 e-mail, Coventree alerted the dealers that some of its debt funds had ties to U.S. subprime mortgages, according to court filings. The market collapsed three weeks later, leaving at least 100 companies and institutional investors, and more than 1,750 individuals, with notes that couldn’t be traded.

CIBC kept selling the paper until Aug. 3, when it became concerned over its liquidity, according to the settlement.

The OSC settlements relate only to the sale of the paper to institutional investors, not retail clients, Turner said.

The OSC set a Jan. 14 hearing for Toronto-based Coventree and its executives. Deutsche Bank AG, Germany’s biggest bank, also faces a hearing on Jan. 6 related to its role in the commercial-paper market.

To contact the reporters on this story: Joe Schneider in Toronto at jschneider5@bloomberg.net; Doug Alexander in Toronto at dalexander3@bloomberg.net
Last Updated: December 22, 2009 00:01 EST


Anonymous said...

When have the Big 5 not run the country in modern times?

Wouldn't it be nice if Canadians had to have at least 1 course in standard, non-ideological economics to get out of high school?


Dr Mike said...

I talk to the folks on the street on a daily basis to try to educate them in the way of big business & governments , how the two are inseparable like conjoined twins.

Most look at me like I am a leftover conspiracy theorist from the 60`s talking against the "man".

I used to laugh at those same guys when I was in University & sloughed them-off as some artsy fartsy types with too much time on their hands.

Having witnessed first hand the changes in gov`t over the last several years as we lose our grip on democracy , I am beginning to see their point.

The continuing shift of power away from the people to the mainly unelected members of the PMO office should be tossing up red warning lights to us all.

It`s time we all woke up before it is too late & the individual has no control over his wider destiny.

Dr Mike Popovich