Bankrupt Banker

Remedan, the company behind Zitech Computer, was declared bankrupt in Hillerød Court today. This has finally put an end to shop chain Zitech that after years of decline has failed to pay a tax claim for 2.6 million dkr. The administrator, lawyer Jorgen Elmer, must now must decide whether it is possible to continue the current three Zitech shops at Frederiksberg, in shopping center Fields in Ørestaden and in Lyngby.
Zitech has been ailing for a long time. Among other things, the company’s approximately 20 employees in the autumn not received their salaries on time. Since Zitech was at the top, there were ten stores in the chain. But a number of closures in recent years has sent the number of Zitech shops down on the current three.

Tribune has hired bankruptcy advisers as the ailing newspaper company faces a potential bankruptcy filing, people briefed on the matter said.The newspaper, which was taken private last year by billionaire investor Samuel Zell, has hired advisers including Lazard and Sidley Austin, one of its longtime law firms, these people said. Tribune has been hobbled by debt related to that sale last year, which has been compounded by the growing drought of advertising for newspapers.It is only the latest — and biggest — sign of duress for the newspaper industry yet. Several newspaper companies have struggled to cope with declining revenues and mounting debt woes. Tribune has pared back the newsrooms of many of its papers, including The Chicago Tribune, The Los Angeles Times and The Baltimore Sun, and it sold off Newsday to Cablevision’s Dolan family earlier this year.While Tribune must contend with hefty interest payments over the next year, its most pressing problem is a maintenance covenant on some of its debt that limits the company’s borrowings to no more than nine times earnings before interest, depreciation and amortization. Even if the company continues to make interest payments, failure to maintain that level of debt means technical default — which does not always lead to a bankruptcy filing. Other newspaper publishers have halted making interest payments on their debt, but have yet to file.A CreditSights analyst, Jake Newman, wrote in a research report published last month that Tribune avoided technical default in the third quarter partially through some accounting adjustments. “We think the company will have difficulty meetings its year-end covenant compliance,” Mr. Newman wrote.Tribune has sought to ameliorate its woes by selling off assets like the Chicago Cubs, the company still faces a looming debt crunch. Tribune hired Lazard several weeks ago to assess its options, these people said. Sidley Austin is a longtime outside adviser to Tribune, and it has a well-respected bankruptcy practice as well.
The company’s problems have long been reflected in the price of its bonds. Tribune bonds maturing Aug. 15, 2010 with a 4.88 percent coupon traded at $13.25 on Friday, suggesting severe levels of distress.

Polaroid, the 70-year-old photography-film maker, sought bankruptcy protection from creditors two and a half months after Tom Petters, founder of Polaroid’s parent company, was arrested on fraud allegations. Polaroid said it made the filing to “facilitate” its financial restructuring. The Minnetonka, Minnesota-based company didn’t list a range of assets or debt in Chapter 11 documents filed today in U.S. Bankruptcy Court in Minneapolis. Its parent, Petters Group Worldwide LLC, filed for bankruptcy on Oct. 11.“The financial-structuring process and the bankruptcy filing are the result of events at Petters Group Worldwide, the company that has owned Polaroid since 2005,” Polaroid said in a statement distributed by PR Newswire today.
Federal prosecutors accused Tom Petters of leading a more than $2 billion fraud at the company. Petters Group was also indicted. Polaroid said it isn’t a target of the Federal Bureau of Investigation’s probe. Lorrie Parent, a Polaroid spokeswoman, didn’t immediately return a call for comment left after business hours. Petters resigned as Petters Group chief executive officer Sept. 29 after the FBI received information that at least 20 investors may have been victims of a lending scam and raided the company’s Minnetonka headquarters. Petters has been jailed since his arrest on Oct. 3. “Polaroid has entered bankruptcy with ample cash reserves sufficient to finance the company’s reorganization,” it said in the statement. “The company has not sought, nor does it expect to seek additional debtor-in-possession financing.”The case was filed by Douglas A. Kelley, Petters Group’s court-appointed receiver. Kelley put Petters Group into bankruptcy after a judge ordered its assets to be frozen. Sun Country Airlines Inc., another unit of Petters Group Worldwide, sought bankruptcy protection Oct.6 for the second time in seven years. Sun Country said it filed for protection from creditors because of the raid on Petters Group and to retain control of its assets rather than have them frozen and under a receiver’s control. The company said its assets and debt are each less than $100 million.
Sun Country said its 20 largest creditors without collateral backing their claims are owed about $256.8 million. Petters Capital LLC is listed as the largest unsecured creditor, with a claim of $184 million.

Electronics retailer Circuit City Stores Inc. announced Dec. 17 that it plans to break the leases for 154 of the 155 stores it’s closing this month. The company was scheduled to auction the leases on Dec. 18 as part of its Chapter 11 proceedings, but too few bids came in to hold the auction. The chain will now break a total of 304 leases, including 150 it received approval to break for already-shuttered locations. The company had originally hoped to sell the leases to reduce its costs and aid in its restructuring; the leases had an average of about 10 years remaining.

rapper Doug E. Fresh is reportedly broke and in danger of losing three houses in Harlem after owing more than $3.5 million in unpaid mortgages.He also owes American Express nearly $60,000 in credit-card debt, and the IRS just slapped him with a $367,000 tax lien on top of more than $40,000 owed to the state tax collector.Doug E. Fresh is reportedly living at his mother’s house until his financial situation gets resolved

Bush administration is looking at "orderly" bankruptcy as a way to deal with the desperately ailing U.S. auto industry, the White House said Thursday as car-makers readied more plant closings and a half million Americans filed new jobless claims.
With Detroit anxiously holding its breath and waiting for federal help, President George W. Bush, asked about an auto rescue plan, said he hadn't decided what he would do.

Larry Frazen, an attorney for Bryan Cave and who handled the sale, said Minneapolis-based investment bank Dougherty Funding bought the plant's assets for "just north of $60 million."Dougherty had submitted a bid of $59.93 million. No other bids were made.Frazen said U.S. Bankruptcy Judge Dale Somers approved the sale and is expected to sign the order in the next day or so.Dougherty holds more than $63 million loans on Gateway's property in Pratt. As of Aug. 31, the company reported assets of $95.7 million and liabilities of $95.4 million.Orion Ethanol owns 62 percent of the company, which filed for Chapter 11 bankruptcy reorganization Oct. 5.Gateway began some ethanol production in October 2007, but it shut down shortly after that without ever reaching full production.

Gary J. Gross, who worked in the Boca Raton office of broker-dealer Axiom Capital Management, recommended unsuitable securities and engaged in unauthorized and often unsuitable trades in his customers' accounts.It is alleged that Gross took in more than $700,000 in commissions and fees, while causing investors to lose more than $2.7 million between 2004 and 2006.To cover up his misconduct, Gross, who now lives in Far Rockaway, N.Y., allegedly provided some customers with documents reflecting false account values, according to the complaint filed in U.S. District Court for the Southern District of Florida.The SEC is seeking a permanent injunction against Gross, as well as attempting to get back the money he allegedly took along with interest and a fine.

Raymond Zwego, 60, led a real estate investment company that purchased more than 50 area homes, obtaining more than $19 million in mortgages by using straw buyers and falsified documents.Chief U.S. District Judge Fernando Gaitan also ordered Zwego to pay almost $5.6 million in restitution.In passing sentence, Gaitan noted that Zwego’s conduct has had a “long range and devastating impact on our community.”
“It’s clear this society has to be protected from a predator like Mr. Zwego,” Gaitan said.Zwego’s scheme collapsed in 2006 when he attempted to purchase a home from former Jackson County Executive Katheryn Shields and her husband, lawyer Philip Cardarella. While the prosecutors charged the couple in the conspiracy, a federal jury subsequently found them not guilty of all charges.Shields and Cardarella, who are Democrats, contended that the charges against them were politically motivated and brought by a Republican-led Justice Department.

Frank L. Amodeo today pleaded guilty to defrauding the federal government out of at least $172 million in payroll taxes.He remains free on $500,000 bond, awaiting sentencing.It's not clear when Amodeo will be sentenced, but he faces a maximum of 25 years in prison and fines that could top $360 million.Amodeo is the formerly high-flying entrepreneur who created Mirabilis Ventures Inc., a conglomerate that bought up distressed companies, including those that provided payroll services.According to his plea deal, those subsidiaries collected payroll taxes but never passed them on to the Internal Revenue Service.The federal government sets the amount of fraud at $182 million. Amodeo says he only kept $172 million. The rest, he contends, was legitimately earned fees.Amodeo signed the plea deal yesterday, but U.S. Magistrate Gregory J. Kelly postponed until today a plea hearing.That took place this morning in Orlando federal court.Amodeo appeared, in a blue suit and his electronic monitor. He said he was clear-headed and understood everything that was going on.That's important because he suffers from bipolar disorder, a mental illness. Yesterday one of his psychiatrists testified that although Amodeo is mentally competent to enter the plea, he's still seriously mentally ill and believes that he will, at some point, come to dominate the world economy.Defense attorney Harrison "Butch" Slaughter Jr. said that at times, during his 2 ½ years of working with Amodeo, the defendant has believed he could forecast the future and could telepathically communicate to people.

Americans have a saying that there is a sucker born everyday. The statement speaks to the gullibility of some people to fall for schemes that are patently fraudulent, and should be avoided the same way one would avoid the plague. There is an ongoing attempt to scam the government and people of Ghana unless sensible people rise up to say no to con-men peddling falsehoods and lies. The damage will be done not only in terms of huge monetary loss, but our national prestige and international credibility will forever be tarnished, if Ghana were to fall for a scam currently being sold by remnants of John Ackah Blay Miezah’s hustlers.Of late, a group calling itself Friends of Oman Ghana Trust Fund (FOGTF) has embarked on a media blitz aimed at gaining the support of the government and people of Ghana to what is essentially a scam akin to what the villain in our folkore, Kwaku Ananse would endeavour to visit on his family.One cannot begin to understand this fraudulent scheme without reference to the name and fraudulent practices of the ‘master con-man’ Blay-Miezah. Indeed, FOGTF claims to be continuing the efforts ‘made’ by Blay-Miezah to gain access to some so-called money. The mere mention of Blay-Miezah should have rang bells, and alerted officials and the public to the scam, but so far, like Blay-Miezah, the perpetrators are doing their job in a fashion that sounds credible to the gullible. According to Blay-Miezah, Ghana’s first president Dr. Kwame Nkrumah named him the sole beneficiary of millions of dollars that Nkrumah had stashed in banks in Switzerland under a scheme described by Blay-Miezah as the Oman Ghana Trust Fund (OGTF). After Nkrumah’s death in 1972, Blay-Miezah managed to sell his OGTF story to investors in the city of Philadelphia, Pennsylvania, USA. Blay-Miezah had lived in the city, and had spent time in a state prison for writing bad cheques, and failing to settle a huge bill at the Bellevue Stratford Hotel in Philadelphia.After the con game was brought to the attention of authorities, Time magazine (April 21, 1986 edition), did a story on investors who had contributed at least $18 million (and possibly $100 million) to the scheme, and quotes Robert Ellis extensively on the modalities of the criminal enterprise. Robert Ellis had posted bond for Blay-Miezah in a previous criminal case in Philadelphia, and in return Blay-Miezah appointed Ellis, his American ‘agent’. The main role for Ellis was to solicit American investors whose money would then be used to facilitate retrieval of alleged millions of dollars bequeathed to Blay-Miezah under the OGTF by the late president Nkrumah of Ghana. Blay-Miezah insisted that he needed cash in hand (which he personally didn’t have!), in order to cut deals with some local Chiefs and government officials, all of whom had some stake in OGTF, and whose palms must be greased in order to enable him to secure the funds. The story being peddled in Ghana today by FOGTF, is rather similar to the tale woven by Blay-Miezah to successfully ensnare gullible investors in the 1970’s.As Time magazine pointed out, those who fell prey to Blay-Miezah were not some wacky illiterate individuals, but highly intelligent and educated professionals. There is a general belief among westerners that Africa’s leaders especially in the immediate post-independence era were corrupt. Therefore no matter how zany Blay-Miezah’s story sounded, people found it hard to discount. A corrupt African ruler had stolen millions from his country’s treasury and stashed the money in Swiss banks. The story had/has a familiar ring to it. And con-men adopted the story to rake in millions from the gullible and the greedy.By the mid-1980’s when the gullible investors had not received a penny on their contributions, and local law enforcement authorities in Philadelphia had been alerted to Blay-Miezah’s con-game, Blay-Miezah was happily ensconced in a posh mansion in London where he was safely protected under diplomatic immunity.
When Blay Miezah arrived in Ghana during General Acheampong’s military regime (about 1975), he conned the government into believing his story. Mr. Ebenezer M. Debrah who had served as Ghana’s ambassador to the United States, and was quite aware of Blay-Miezah’s machinations, was the secretary to the military government of the National Redemption Council. Reports at the time indicated that Mr. Debrah provided a dossier on the criminal activities of Blay-Miezah and strongly warned the government to stay clear of the man. However, Blay-Miezah’s story had made such an imprint on the Ghanaian psyche, and the man laundered money so much so that, Debrah was seen as an impediment to Ghana receiving a windfall. Mr. Debrah was sacked as Secretary to the government. Blay Miezah’s public relations machine was quite effective, and it included stalwarts in the Nkrumah regime such as the impressive Krobo Edusei and Kwasi Amoako-Attah a former Minister of Finance.With his main antagonist out of the way, Blay-Miezah successfully sold his story to the government and then claimed that he could only retrieve the money if a diplomatic passport was issued to him. In reality, his acquisition of the diplomatic passport provided immunity and cover from outside prosecution. Consequently, when a criminal case pertaining to the fraud was brought against him in the United States of America in the 1980’s, Blay-Miezah could not be extradited to Philadelphia to face charges relating to financial extortion and other crimes. Blay-Miezah’s diplomatic passport would be renewed by the PNDC military government which ruled Ghana from 1981-1992.
Thus, the late Ed Bradley had to go to London to interview Blay-Miezah for the American CBS TV station’s 60 Minutes investigative report. I will never forget Ed Bradley’s interview of Blay-Miezah. The day after the interview, our American classmates who had seen the program looked at me and the other African students in awe. The Americans wondered how the African could come up with such a well-crafted story to outwit these highly educated, professional white Americans?
The master stroke however, was Blay-Miezah’s insistence that the interview with 60 Minutes could not commence unless Bradley provided the best gin for Blay-Miezah to invoke the spirit of his ancestors, by purifying his Stool, the symbol of his traditional authority, and the embodiment of the souls of his ancestors! Bradley looked on rather bemused as Blay-Miezah gargled a mouthful of the liqour and then released powerful sprays 3-times onto the ancestral Stool!
As one elderly Jewish woman who had invested his lifetime savings in the OGTF, and who appeared on the program wondered: How could Blay-Miezah not be rich, and be the beneficiary of such huge largesse when he accommodated the investors in posh most exclusive hotels in London, Geneva, and Paris. Of course, Blay-Miezah could afford exquisite entertainment for his investors because he was using their money!! Blay-Miezah himself did not have a dime to his name by himself. No wonder, Ed Bradley said that of all the con men he had been involved with, Blay-Miezah was "clearly head and shoulders above the rest . . . the best con man I’ve ever seen in my life."
The preceding provides more than a cautionary tale to the government and people of Ghana as a latter-day Blay-Miezah seeks to resurrect a discredited scam that has spawned copy-cat scams all over the world.
When Blay-Miezah concocted his scheme and defrauded the gullible and greedy investors of their hard-earned money, the scheme was largely anonymous. Today, thanks to the Internet and massive participation by Nigerian fraudsters, the scheme is called 419, so-called after the section of Nigeria’s legal code dealing with financial scam. What the FOGTF is claiming is quite similar to a 419. It is a sad commentary on the state of affairs of the body politic when government officials and the media cannot see through the ruse being currently peddled by the so-called FOGTF.
Like Blay-Miezah before him, Gregg Frazier who is currently presented as the ‘sole trustee’ of the Oman Ghana Trust Fund, is reportedly demanding a Ghana diplomatic passport to facilitate retrieval of the money. Like Blay-Miezah before him, Frazier passes himself off as having been anointed sole trustee of OGTF after the death of Blay-Miezah; and Frazier similarly claims to be the only living soul with knowledge of a ‘special security code and password’ needed to redeem the money. Just as Blay Miezah had his American ‘agent’ to do his bidding in the U.S.A.; Frazier has his Ghanaian local front man in the person of one Kobla Asamani who is sometimes addressed as “His Awardship Kobla Asamani” to smoothen his way among the Ghana labyrinth! And like Blay-Miezah, Frazier seeks government assistance in the scheme.
Kobla Asamani who signs press releases of the Friends of Oman Ghana Trust Fund, warns that Frazier is advancing in age, and the government of Ghana should therefore act with alacrity to help Frazier secure the funds else Frazier takes knowledge of the security code and password to the grave! Blay-Miezah’s minions used to give similar ominous warnings!
These two men and their so-called Friends of Oman Ghana Trust Fund have embarked on a media show to press their fraudulent case. They have managed to get Ghana’s Finance Minister Baah Wiredu to signal interest and support for the scheme, according to reports in the Ghana news media currently saturated with news about FOGTF and OGTF. Frazier and his group have managed to meet with the Finance Minister in the latter’s office. We must stop this nonsense before it is too late!!
Blay-Miezah similarly used the media to get his way. He was feted by some of Ghana’s most accomplished businessmen and industrialists, some of whom were too eager to carry his luggage publicly; and offered him sumptuous accommodations. The FOGTF is adopting similar tactics to wine and dine some journalists to do FOGTF’s bidding. I am sure there may be some gullible people in positions of power and influence who may fall prey to the machinations of FOGTF. After all, Gregg Frazier who is an American, understands that there is a sucker born everyday.According to Gregg Frazier and FOGTF, Oman Ghana Trust Fund now has money nearing THREE TRILLION DOLLARS! That would be enough to rescue AIG and Lehman Brothers in the ongoing banking crisis in the U.S.A.!! There is no Oman Ghana Trust Fund. And there is no money anywhere in spite of promises being made by Frazier. Blay Miezah made similar promises, including one that if he did not bring the money he could be shot. This promise came after he was arrested and jailed by the PNDC government of ex-president Rawlings. Blay-Miezah conned people including Gregg Frazier (who claims to have given millions to Blay-Miezah). Sadly, FOGTF is now too late to a game where the most gullible continue to be conned. If Frazier believes otherwise, I am sure he would wish to buy my parcel of virgin forest in the Louisiana swamps in the USA! As an American he would understand the nature of my offer!!! Rather than holding meetings to aid and abet this forgery, I urge the government of Ghana to treat the claims being made by the so-called FOGTF with utmost contempt. The group must be warned in no uncertain terms that continuing this calumny, and using Ghana’s name in such fraudulent and despicable manner could invite serious legal problems for the group and its members.

Dennis Raymond Sheffield, who pleaded guilty in June to 6 counts of bank fraud, also will have to pay back $953,557 he obtained from Robertson Banking Co. in 2001 and 2002. "That's going to be difficult in light of his financial situation currently and other obligations," said defense lawyer Tommy Spina, who unsuccessfully argued for leniency. For the last three years, Sheffield has worked as a salesman for Knight Sign Industries in Tuscaloosa, earning $45,000 a year. Prior to that, Sheffield owned Tall Timber Inc. and had a longstanding relationship with Robertson Banking Co. That is how he was able to get loans in 2001 and 2002 for what turned out to be bogus deals. Sheffield, 47, falsely told the bank that he had a valuable timber sale contract and timber deeds signed by officials of the U.S. Department of Agriculture's Forest Service allowing him to cut and remove trees in the Talladega National Forest in Bibb County. The next year, he falsely told the bank that he had a timber contract with United Land Corp. of Birmingham to remove trees in various parts of Tuscaloosa County. In both cases, according to his written plea document, he went to great lengths to fool the bank, submitting phony maps, contracts, deeds and other documents. He also toured forest land with bank officials. When Robertson Banking officials began asking why the timber was not being cut, Sheffield blamed bad weather conditions and labor shortages.

$58,000bn credit default swaps market as “ripe for fraud and manipulation”, saying that it was a forum for the shorting of corporate debt without the oversight imposed on cash markets.It was, of course, Congress that chose in 2000 not to extend regulation to OTC derivatives markets, as I noted in my column on Saturday. One of the most influential proponents of not regulating OTC derivatives was Alan Greenspan, then chairman of the Federal Reserve.Mr Greenspan told Congress in 2000 that regulation of the OTC derivatives market was not needed because:“OTC transactions in financial derivatives are not susceptible to - that is, easily influenced by - manipulation.”So then, the OTC derivatives market. Not susceptible to manipulation, or ripe for it? What a difference eight years, and a global financial crisis, make!At the time, Mr Greenspan’s reputation and influence was at its height, and Congress went along with his assessment. I presume that it will now change its mind.

Banks may accelerate efforts to move trading in the $62 trillion credit-default swaps market through a central clearinghouse or to an exchange after the bankruptcy of Lehman Brothers Holdings Inc. and the credit downgrade of American International Group Inc. Lehman, the first major market-maker to go bankrupt in the decade-long history of the privately negotiated, unregulated business, may leave behind billions of dollars in potential losses for trading partners, according to Barclays Plc of London. No one knows exactly how much because there's no central exchange or system for recording trades. ``The fact that I can't tell you the notional value of derivatives contracts Lehman has written the day after a bankruptcy is a scary thing,'' Brian Yelvington, a strategist at New York-based bond research firm CreditSights Inc., said yesterday. A clearinghouse capitalized by owners could have reduced the risks because it becomes the so-called counterparty, for a fee, to each side of the trade. Now, banks are sifting through trading positions to ``net'' trades that offset each other and reduce potential losses. Untangling that web may last into 2009, said John Jay, a senior analyst at Boston-based Aite Group, a financial services consulting firm. ``Just figuring out what they have could take a week, but the thornier issue is to figure out valuations,'' said Jay. ``It's a Gordian knot because you have different ratings, different counterparties, different end-dates and you have to somehow attach a value to these contracts. It's an operational nightmare and a legal nightmare of interpreting what each contract says.'' The Markit CDX North America Investment Grade Index, which rises as confidence in companies deteriorates, climbed as high as 195 basis points yesterday, from 152 basis points at the close of trading on Sept. 12, according to broker Phoenix Partners Group. The index reached a record 200 during an emergency trading session on Sunday, Sept. 14 as investors tried to prepare for the collapse of New York-based Lehman. A basis point is 0.01 percentage point.
Prices continued to rise in Europe and Asia today after credit ratings on AIG, the biggest U.S. insurer by assets, were cut by Standard & Poor's and Moody's Investors Service. Contracts on the Markit iTraxx Crossover Index of 50 companies in Europe with mostly high-risk, high-yield credit ratings climbed 33.5 basis points to 627.5, according to JPMorgan Chase & Co. prices at 7:19 a.m. in London. The Markit iTraxx Australia Series 9 Index increased 35 basis points to 220 basis points, matching the all-time high of March 17 when Bear Stearns Cos. was bailed out by the Federal Reserve, according to ABN Amro Holding NV. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. Each contract is a separate agreement between two so-called counterparties and trades in over-the-counter transactions, leaving parties exposed to the risk that their partner will default.
Barclays analysts estimated in February that if a financial institution that had $2 trillion in credit-default swap trades outstanding were to fail, it might trigger between $36 billion and $47 billion in losses for those that traded with the firm. That doesn't include the market-value losses investors face as the cost to protect companies against a default widens. ``There should be some central agency which prevents risk in the future of a large counterparty failing and causing losses,'' said Puneet Sharma, the head of investment-grade credit strategy at Barclays Capital, the U.K.'s third-biggest bank. ``This was not necessary.'' Wall Street created credit-default swaps more than a decade ago to help banks hedge against loan losses. Dealers later came up with contracts and indexes that allowed investors to speculate on a borrower's creditworthiness without owning any bonds.
The market grew 100-fold in the past seven years leaving dealers, who until a few years ago recorded trades on scraps of paper, struggling to keep up. New York Fed President Timothy Geithner assembled dealers in September 2005 to develop a plan to reduce the backlog of paperwork and unconfirmed trades. In July the 17 dealers agreed to form a clearinghouse, create a system to better manage the collateral that protects trading partners from losses and tear up offsetting contracts to reduce the number of positions that banks have to oversee.
The clearinghouse may fall behind schedule, delaying completion until next year, said a person familiar with the process who asked not to be identified last week because the discussions weren't made public. The development was postponed after the Fed pushed Chicago-based Clearing Corp. to obtain a banking license, which would place it under the central bank's watch, the person said. A spokesman for the Federal Reserve Bank of New York, Andrew Williams, declined to comment. Clearing Corp. spokesman Andy Merrill declined to comment, pointing to a statement last week that the company ``and its clearing participants have been moving aggressively to prepare the CDS platform for launch as soon as the appropriate regulatory approvals are achieved.''
``The industry's progress in building a strong foundation for our business will enable it to successfully address current issues,'' said Eraj Shirvani, chairman of the International Swaps and Derivatives Association and head of European credit at Credit Suisse Group in London, said yesterday in a statement.
Clearing Corp. said it will guarantee trades between dealers, at least at first, and only contracts on benchmark indexes rather than on individual companies.

banks in the UAE have slashed the daily cash withdrawal limit of ATM users by almost half after hackers, who police said were from Russia and Ukraine, used counterfeit bank and credit cards to steal funds from customer accounts.
Some banks even blocked international use of ATM cards as a preventive measure while HSBC Bank temporarily reduced the daily withdrawal limit to Dh6,000 for premier card members and Dh4,000 for others as part of measures to contain the damage.
As thousands of customers thronged ATM machines to change their card PINs (personal identification number) over the past three days, most banks in the UAE said they would continue the state of alert against the fraud, but refused to disclose the size of the money stolen or how many accounts were skimmed.An initial investigation by banks indicated that cash machines were rigged with devices that stole customers’ PINs as they made withdrawals. Jonathan Campbell James, regional head of security and fraud risk, HSBC Middle East, said his bank did not implement a general blocking of overseas transactions as its customers expected to have access to their accounts wherever they travel.“But when we detect a series of fraudulent transactions coming from a particular geography, we may temporarily restrict access,” he said Major-General Khamis Matar Al Mazeina, Deputy Commander-in-Chief of Dubai Police, said the hackers are from Russiaand Ukraine. Banking sources, however, said the hackers were part of an international network, with most of the fraudulent transactions originating from more than 20 countries outside the UAE.Al Mazeina said the police were trying to find out the methods used by the gang to steal from bank accounts. “We want to find out whether the breach occurred when customers used their cards to buy on-line or when they used their cards within the UAE and certain other countries.”He said police still did not have any clue about the number of people and banks hit by the fraud or the total amount stolen by the gang.“We are in touch with credit card companies, banks and fraud victims although we have not received any complaint so far.” He said the police would meet concerned authorities to probe into the matter and find measures to protect credit card users.Banks said only ATM debit cards have been counterfeited. “The attack is more sophisticated than that are routinely experienced, and has come from multiple countries,” Campbell James said.
Most banks continued to encourage customers to change their PIN numbers. “Because a large number of customers have already done so, a significant number of attempts by fraudsters to steal from customers’ accounts have been frustrated,” the bank official said. “HSBC and several banks in the UAE have identified fraud that appears to result from the compromise of ATM information from another bank.
This information has been used to produce counterfeit cards that have been used internationally.”The bank official said if a customer’s card had been copied and used to steal money, the bank would contact the customer, advise them what had been done, organise a refund and issue a new card free of charge.
“Our special accelerated procedure for refunding UAE customers affected by this particular fraudulent attack is working well. A substantial number of customers have already received their refunds and the process of issuing free replacements for cards which have been compromised is on track.”

Bankruptcy of Lehman Brothers has far more serious implications for the world’s financial system, with possible consequences to the Gulf, than did the demise of Bear Stearns. The Lehman collapse has changed the game of how regulators now deal with financial institutions, and potential bailouts are no longer an option.
The accelerated momentum of securitisation of mortgage loans in 2005 caused the subprime crisis, not the low interest rates when the Fed reduced Fed funds to 1 per cent. The sale of securities from credit pools had never reached such a level before. When US investment banks discovered the appetite of foreign institutions, commercial banks sped up their loans to uninformed borrowers to meet the soaring investor demand.
Banks transferred to their trading books what cost too much on their credit books (8 per cent of their assets in equity) even though the so-called “securities” were for the most part illiquid private placements. This trend to structure credit in the cheapest way possible by avoiding capital requirements was blatant regulatory arbitrage on a massive scale. But this was caused by the central banks themselves who insisted on a higher and costly capitalisation on banks, who in turn tried to minimise such costs by moving assets off-balance sheet.
Second, the investor demand for this structured paper was not triggered by the “excess liquidity” created in the low interest rates since 2001, but it instead represented the most massive transfer of wealth ever recorded in history. Two billion individuals moved in a matter of only a few years from a state-controlled economy to semi-capitalist private systems, and the productivity gains across both western economies and emerging market economies unleashed a virtual flood of financial wealth and savings, with the world capital stock nearly trebling from US$60 trillion (Dh220.4trn) to $160trn. One only has to observe these phenomena in the Gulf over the past few years to see the effect on new wealth creation for many classes of citizens.
These same citizens must now be wondering what happens next and the news is not looking good, given the inter-linkages of counter obligations among financial institutions. It will take months to unwind Lehman’s complex deals and obligations with other banks, and given the company’s high-profile presence in the Gulf, it would be a brave soul to state that Gulf institutions will not be affected this time around. Tighter credit and higher margins will be the order of the day as banks seek quality clients, and investors, in turn, seek quality financial institutions whose numbers seem to diminish by the day.
Until the collapse of Lehman, the assumption had been that any financial institution operating at the centre of the international financial system, be it a commercial or investment bank, is simply too big and too interconnected to be allowed to fail or to be wound down quickly for fear of a systemic breakdown. This assumption has now been shaken.This raises the issue of fiduciary risk. Two thirds of the capital flows today go through fiduciaries, those who act as managers, custodians, broker-dealers, administrators or trustees, while credit banks, the dominating power of finance until the 1980s, have become marginalised. The whole texture of finance shifted from a classic loan industry to one of securities trading, warehousing, arbitrage and valuation. Institutions don’t lend cash anymore: they lend securities and exchange credit swaps and interest rates.The shift was so sudden and reached so deeply in a structural sense that it heightened the fragility of the whole system. No wonder regulatory tools based on a credit model have proven to be so ineffective. As long as the industry was dominated by credit and an obligation to generate and protect the “results”, one could reinforce the walls and limits of a regulated system. But when the industry is overtaken by institutions acting as fiduciaries rather than creditors, the obligation is only of the “means” (ie “best practice”) not of the ends, or the result of their imprudence, so how do you effectively regulate that? What is worrying is that more and more Gulf institutions have been following the fiduciary route with traditional credit-related commercial banking taking a secondary role.A move to enlarge the supervisory role of a central bank is likely to create an unprecedented concentration of powers with no corresponding real and effective means to intervene and contain market excesses save for “bailing out” creditors who make the asset bubbles possible. What’s more, by guaranteeing impaired assets, central banks are exposed to capital losses, however over-collateralised the central bank is in its term lending through its new liquidity facilities. As the current crisis itself has shown, when all the financial institutions – rather than just one or two in trouble – face funding risks at the same time, there is not much value in the collateral you are holding unless you can hold it for a long, long time. This is what made Barclays decide to pull out of the Lehman rescue effort.
The Lehman collapse raises the question whether central banks could go under in the wake of their market intervention during a financial crisis. The Fed’s total equity stands at $40 billion versus the $29bn needed to guarantee Bear Stearns alone, and this is without Freddie Mac and Fannie Mae support. A central bank can never go “broke” per se, of course, since a government will always replenish its capital base if the losses due occur. But that would also entail, in effect, printing money at a time when inflation is an issue. Concerning Lehman, the Fed has declined to pump in money to bail it out and some, including Alan Greenspan, are now calling for a new model of financial supervision that does not automatically bail out failed banks. Some have put forward drastic solutions given the potential capital adequacy problems of central banks to support a total collapse in the financial system.
One suggestion is that we need to limit the size of financial institutions. We should limit their size instead of facing the unavoidable option of having to save them. In short, once an institution grows too big, it should be split as AT&T once was in the late 1970s, and IT companies in this century. The argument was one of the social and economic needs to break a cartel, whereas today it is the size itself that becomes so unmanageable relative to the means of containing a systemic risk.
In both cases, the goal is to improve market efficiency. Should we move back to restore the strict division between commercial and investment banking and put an end to such a massive regulatory leakage? The answer may lie in the transition of the industry itself. The “old” Fed had regulatory responsibilities over a traditional commercial banking industry that is mostly a relic from textbooks, while the “new” Fed must consider the financial industry in whole. It is possible that the new regulatory fabric that arises will produce clear lines of responsibilities, dividing the new credit and fiduciary roles within the finance industry, as both sides are not subjected to the same performance obligations.
Given the explosion of commercial and investment banking in the Gulf, this issue will also be an important one for GCC regulators. The trend in the region was for larger banks and mergers to face the big boys from outside. This will cause the same dilemma for Gulf regulators in case one major financial institution faces trouble, but given the state of fragility of banking confidence due to recent fraud and scandals the likely option in the Gulf is to discreetly bail out. In the final analysis, let us hope that in trying to fix this current mess, the regulators do not lay the seeds of a future financial meltdown.

HBOS has frozen the accounts of Andy Hornby, its chief executive, after a thief stole his identification details and withdrew thousands of pounds in cash.
Mr Hornby, who earned £1.7m last year, is said to have been told the news while on holiday.Fraud investigators are now poring over Mr Hornby's accounts to work out how much money has been stolen.The thief is believed to have obtained one of Mr Hornby's bank statements and used it to pose as the 41-year-old chief, stealing up to £7,000 in one day.The fraudster is said to have been filmed on CCTV withdrawing cash from bank branches and from an ATM machine.The embarrassing episode adds to a gruelling year for Mr Hornby, who has had to face shareholder unrest since HBOS launched a £4bn rights issue in April. It is not known for how long the fraudster had access to the accounts before staff became aware of the theft.The good news for Mr Hornby is that he will probably be eligible for a refund from HBOS. The bank said that, like all lenders, it will generally reimburse customers who are victims of fraud if they have taken sufficient care to safeguard their details. Banks advise their customers to shred financial documents and to keep those that are not shredded in a safe place.HBOS declined to discuss Mr Hornby's case, saying that the bank never commented on an individual customer's affairs.

Two people had been apprehended by London Police’s the Dedicated Cheque and Plastic Crime Unit when they raided a factory that made counterfeit credit cards. The people that were caught are involved in credit card fraud, were charged with conspiracy and defraud cases.The machines and gadgets that the criminals used were also taken into custody. Among those that were discovered included robbed chips, fake credit cards and account numbers, PIN terminals, fake magnetic strip cards, card reader and computer softwares.John Folan, Detective Chief Inspector of the DCPU, said that the positive turn out of the raid is one of the largest busts made and that it proved to be a welcome outcome for the Police’s efforts to quell crime, especially credit card and check fraud. He said that the bugged chips and PIN terminals have been spread in retailer’s outlets all over UK, which was believed to be more than twenty.
For people who are just thinking of applying for a credit card, go ahead and compare different credit card offers because the Association for Payment Clearing Services noted that card holders are protected by a banking code against such crimes.

Mortgage Asset Research Institute just released a report on mortgage fraud for the first three months of the year, and California ranked No. 2, behind the No. 1 state of…..Florida!Coming in No. 3 was a three-way tie: Illinois, Maryland and Michigan.The MARI maintains a database of reported incidents of fraud and misrepresentations, and the ranking is based on total number of properties involved in fraud (the totals were not given). Nationwide such reports were up 42 percent in the first quarter vs. a year ago. And here I thought fraud would decrease after the credit crunch began last summer.
Although the report didn’t break out Orange County, it said in California 52 percent of properties with “misrepresentations” are in the Los Angeles.
“Income and employment misrepresentation on the mortgage application rank high in Florida, California, Illinois and Maryland. Florida and Maryland report higher income than employment misrepresentation, and California and Illinois report slightly higher employment than income misrepresentation.”“The first quarter data reveals that loan application misrepresentation continues to plague the industry. According to the FBI’s 2007 Mortgage Fraud Report, ‘the downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market. Simply stated, mortgage fraud will not disappear

Increasing rates of global cyber fraud, it has been discovered that Nigerian banks have lost over N7.3 billion to cybercrime related activities.
The Chief Executive Officer of the Global Network for Cyber Solution, Mr. Segun Olugbile, disclosed at a Press Conference in Abuja, yesterday.He said that banking industry, as one of the most strategic sectors of the economy needed protection from cyber-criminality considering the huge amount of funds lost in that sector annually.
He pointed out that some of the rampant cyber corrupt practices in the banking sector include online financial fraud inside-out, identity theft, system penetration by outsiders, data and network sabotage and denial of service attacks.Mr. Olugbile whose organisation recently convened a national stakeholders’ conference on Cybercrime and Cyber security to address the challenging issues and their impact on Nigeria, said global loses $200 billion dollars annually in direct and related damages to Cybercrime which also said was a threat to world peace and security.“The quantum effect of the emerging monstrous challenge of Cybercrime to developing economies translates into a colossal digital nightmare to the African Continent and indeed, particularly to Nigeria”, he said.The CEO added that there were reliable case studies to prove that an attack on a national infrastructure could, by virtue of its catastrophic consequences, completely paralyze the machinery of Government.
He therefore urged the federal government to declare Cybercrime and Cybersecurity as a National emergency, which deserved conscious political will and special budgetary resources to effectively engage the challenges presented by its impact.
Mr. Olugbile also called on Nigerian legislators to enact into law National Information Infrastructure (NIIA) Act, provide legislative framework for cyber crime and security and establish Cyber Crime Reporting and Response Centre, as well as, a Cybercrime and Cybersecurity Training Centre.

Colorado Springs man and his two oil and gas companies have agreed to pay $510,000 to settle civil fraud allegations, the Securities and Exchange Commission said Thursday.The SEC alleged that between March 2002 and December 2006, Donald H. Allen and his companies H&M Petroleum Corp. and American Energy Resources Corp. raised about $9.9 million from more than 350 investors nationwide without disclosing that they had never generated profits for investors.Allen did not immediately respond to a telephone message.Allen was accused of spending $2.3 million of investor funds to pay for items including a custom speedboat, ski vacations, fitness equipment and jewelry.The SEC alleged Allen and his companies touted annual returns of up to 354 percent without disclosing the speculative nature of the projections; incorrectly told investors that AER and H&M invested in their own projects; that securities were improperly sold in unregistered transactions; and that Allen acted as an unregistered broker.Allen and his companies settled the case without admitting or denying the allegations

Two Michigan men face federal charges in an alleged fraud scheme using stolen personal information to obtain bank loans for purported purchases of yachts. Court documents filed Thursday say the two tried to steal financial information of a Milwaukee lawyer in the attempt to buy a yacht worth about $550,000. Charged with scheming and conspiring to defraud a bank are 31-year-old Michael Vorce of Grand Rapids and 29-year-old James Jett of Byron Center. Authorities say the alleged scheme involved use of the personal information to get expensive loans for the purchases, even though in some cases the yachts were fictitious. The FBI issued a news release saying the investigation is continuing into the multistate scheme said to involve at least $2.6 million and at least four financial institutions.

Avusa Media Ltd payroll administrator Laurence van Tonder, who allegedly defrauded the company out of more than R5-million in three years, has appeared in the Port Elizabeth commercial crimes court.Van Tonder, 38, of Hampshire Road, Sherwood, Port Elizabeth, reportedly pocketed R1653254 of the money himself, but the state has charged him with taking the entire amount of R5075552.He is accused of 94 counts of fraud, committed between November 2005 and December last year.He was not asked to plead and no evidence was led. The case was postponed to September 15, possibly to plead to the charges. Van Tonder is out on warning.His duties at Newspaper House included capturing the monthly payroll on the electronic payroll package system and reconciling monthly payments to Discovery Health.Van Tonder allegedly opened four FNB accounts in his name. A fifth one was opened at Nedbank for his life partner.
He then allegedly entered inflated payments on the transfer request forms for payment to Discovery Health, and altered the banking details to reflect these amounts, misrepresenting to Avusa Media Ltd that the bank accounts belonged to Discovery Health.

Bradford & Bingley, admitted yesterday that it had been forced to take an £18 million impairment charge in the half year to June 30 to cover borrowing by criminal gangs and other fraudsters. The sum represents an increase on a £15 million charge taken in June. B&B’s losses may be only the tip of the iceberg. The Association of Chief Police Officers has estimated the scale of mortgage fraud in the UK at £700 million a year, but many believe this to be conservative. Navigant, a consultancy that conducts forensic investigations, has estimated that British mortgage lenders could be sitting on at least £7 billion of fraudulent loans. B&B, which has 3 per cent of the mortgage market, is the first high street bank to disclose the size of its losses due to fraud. Rod Kent, its chairman, said that the bank had not been singled out and was no more vulnerable than other lenders. “We don’t think we are being selected, we are just being more transparent,” he said.

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible. "It has the potential to be an epidemic," Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said.Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it's also clear that the FBI failed to avert a problem it had accurately forecast.Banks and brokerages have written down more than $300 billion of mortgage-backed securities and other risky investments in the last year or so as homeowner defaults leaped and weakness in the real estate market spread. . .Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn't just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle. . .
Sources familiar with the FBI budget process, who were not authorized to speak publicly about the growing fraud problem, say that he and other FBI criminal investigators sought additional assistance to take on the mortgage scoundrels. They ended up with fewer resources, rather than more.In 2007, the number of agents pursuing mortgage fraud shrank to around 100. By comparison, the FBI had about 1,000 agents deployed on banking fraud during the S&L bust of the 1980s and '90s, said Anthony Adamski, who oversaw financial crime investigations for the FBI at the time.
The FBI says it now has about 200 agents working on mortgage fraud, but critics say the agency might have averted much of the problem had it heeded its own warning.

Widespread fraud. Hundreds of billions of dollars in losses. Thousands of displaced homeowners. You'd think somebody would have seen it coming… The Los Angeles Times reports that as early as 2004, the FBI accurately forecast the consequences of unscrupulous lending practices left unchecked. Unfortunately, despite the agency's assurances that it was combating the problem, its focus on "national security and other priorities" left white collar crimes a secondary priority. How secondary? During the S&L bust of the '80s and '90s, the agency had 1,000 agents devoted to banking fraud. In 2007, the number of agents pursuing mortgage fraud totaled 100. To critics, that's a sign that the FBI dropped the ball. The agency, meanwhile, says it did the best it could—mortgage companies simply didn't want to hear its warnings about the growing fraud problem. And your home—oh yeah, that's the bank's now.
Let's hope the next time around, somebody is paying a little more attention.

Soaring housing prices in Dubai are likely to peak in 2009 before falling at least 15 percent as the Gulf emirate takes measures to weed out short-term speculators, a Reuters poll showed on Tuesday.Residential property prices in the desert city, home to palm tree-shaped islands and an indoor ski slope, are likely to jump 35 percent this year, according to the median of forecasts from 10 analysts at banks, investment firms and research institutions.Price growth will probably slow to 8.5 percent next year, when five of nine analysts expect prices to hit a peak after double-digit increases in each year since Dubai opened its property market to foreign investment in 2002.

trial of Emirati businessman Abid Al-Boom has heard evidence that he owes depositors 847 million dirhams ($231 million) while assets seized covered only 15 percent of the amount, the UAE daily The National reported on Wednesday.Thousands of investors, including many on fixed low incomes, say they have lost their life savings in a bogus multi-million dirham investment portfolio run by the Al-Boom, prosecutors said.After receiving numerous complaints from depositors, Dubai Attorney General, Essam Eisa Humaidan, in July ordered al Boom’s arrest along with eight others, including an African business partner, an Emirati business partner and Al-Boom’s brother Khalid, the paper added. “We have registered to date complaints from 3,458 depositors and counting. My office has been busy answering calls from depositors and we have referred the case to the Dubai Rulers Court where auditors will examine al Boom’s accounts to determine where the money has gone,” the paper quoted Yousef Foulaz, the chief prosecutor for Deira First District as saying. "The final amount is likely to go up as we continue to receive and register more complaints."Mr Humaidan had earlier ordered the closure of the offices of Al Boom Holding LLC, and Abid Al Boom Management and Development Properties, the suspension of trading in shares owned by the accused and the freezing of all assets belonging to them, including any real estate and bank accounts held by the accused, in order to secure investors’ rights, the paper said.

Hernan Arbizu was arrested Monday in Buenos Aires on charges filed in U.S. District Court in May.Arbizu was a vice president in the private banking division at JPMorgan when he embezzled the money between March 2007 and April 2008, prosecutors said. He caused $5.37 million to be transferred out of private banking accounts at the UBS (nyse: UBS - news - people ) and JPMorgan financial services companies during that time, they said.Arbizu was responsible for maintaining and developing private banking relationships in Latin America at the time, court papers said.It wasn't immediately clear who would represent Arbizu on charges of embezzlement, bank fraud and aggravated identity theft.U.S. authorities were seeking to extradite Arbizu to New York.If convicted, Arbizu, 41, could face up to 30 years in prison and more than $5 million in fines.A spokesman for JPMorgan, which fired Arbizu in May, said the company "appreciates the cooperation and the prompt joint action of the Argentine and American authorities."

Lou Pai, the former chief executive of Enron Energy Services, with improperly selling hundreds of thousands of Enron shares in 2001.The stock market regulator said Mr Pai sold the shares after being informed that the Enron subsidiary had sustained substantial losses, but before the losses had been reported publicly.
Mr Pai, who has neither admitted nor denied the SEC's charges, has reached a settlement with the SEC under which he has agreed to pay a $US1.5 million ($1.6 million) fine. The former Enron high-flyer has also agreed to pay $US30 million in disgorgement of his gains and other related fees relating to the allegedly improper stock trades.
“The commission has never relented in pursuing fraud committed by Enron's executives, and I am pleased that today's settlement will add another $US25.5 million to the Enron Fair Fund for the benefit of injured investors,” said Linda Chatman Thomsen, the SEC's enforcement chief. The charges and settlement with Mr Pai come seven years after the collapse of Enron, which once was one of America's biggest energy trading companies. Enron's 2001 collapse amid an accounting scandal and wide-ranging government and congressional probes into its accounting practices was one of the biggest scandals in US corporate history. Other former top Enron executives have faced prosecution and been jailed for their roles in trying to cover up the accounting fraud. Enron's former chief executive, Jeffrey Skilling, is serving a 24-year sentence in a federal prison. His co-defendant, former Enron chairman Kenneth Lay, was found guilty of fraud and banking violations, but died in 2006 of apparent heart failure before he was sentenced. Mr Pai is barred from working as an executive or director of a public company for five years.

The FBI is investigating possible fraud at IndyMac, the California lender which was seized by regulators last Friday after America's biggest high street bank failure for two decades. Law enforcement sources told the Associated Press that the inquiry revolved around home loans made by IndyMac to risky borrowers and was focused on the bank itself, rather than on individuals who ran it.The FBI declined to comment on IndyMac specifically, although a spokesman said the scope of the bureau's examination of the sub-prime mortgage industry had broadened from 19 inquiries to 21 since April. A spokesman said: "We receive information from a variety of sources on a daily basis, and we have an obligation to review each allegation on its merits."
Banking regulators took over IndyMac after a run on deposits, as customers withdrew $1.3bn in 10 days. At its peak, IndyMac had assets of $32bn. Under a federal insurance scheme, the first $100,000 of savings for each depositor is guaranteed. But anxious customers continued queueing outside branches to withdraw savings this week. Pasadena-based IndyMac is the fifth US bank to close this year, and is the biggest failure since the Chicago bank Continental Illinois collapsed in 1984. An estimated 10,000 customers could lose unprotected deposits of some $1bn.
A New York senator, Charles Schumer, who wrote a public letter in June raising concerns about lax lending at IndyMac, has been blamed by the Office of Thrift Supervision for inciting panic among customers. Schumer argues that the OTS is responsible for allowing the bank to become vulnerable in the first place.
IndyMac's demise has prompted jitters about other regional banks. Seattle-based Washington Mutual and Ohio's National City Corporation were obliged to issue statements denying liquidity crises this week after their shares plunged.

Jagmeet Channa, 25, showed no remorse as Judge Geoffrey Rivlin, sitting at the Southwark Crown Court, bemoaned his limited sentencing powers in dealing with the "audacious and outrageous" crime.
Channa had previously pleaded guilty to one count of conspiracy to defraud and another of money laundering after he admitted using colleagues' passwords to steal money from a trading account which he then wired to associates in Manchester and Morocco. Today, Judge Rivlin told him: “This was no silly prank. This was a carefully planned and very serious attempt to transfer a fortune in money away and it almost succeeded." Channa worked at the Canary Wharf headquarters of Britain's largest bank for less than a year. In April, the court heard, he sent €60 million from an HSBC trading account to a Societe Generale branch in Casablanca; minutes later, he wired another €30 million to a Barclays branch in Manchester.
However, Channa forgot that the account he had raided had to show a zero balance at the end of each day. The massive debit was discovered over the weekend by HSBC employees in Malaysia, who alerted colleagues in London. Both Barclays and Societe Generale were quickly contacted and the money was returned. HSBC estimated it lost about £54,000 in interest while the money was in other accounts. Initially, the employees whose passwords had been used by Channa were arrested and blamed for the crime. But further inquiries exonerated them and led to Channa, who was sacked by the bank. The court heard that Channa had taken the money at the direction of one or more co-conspirators, in exchange for the promise of a handsome cut. His defence lawyer, Peter Corrigan, said: “Because he had the sort of job he did, offers were made to him and he succumbed to temptation."
However, Channa's refusal to cooperate with police meant that no other party involved in the crime has yet been identified.
Judge Rivlin said: "Others were inolved, perhaps several others, and in the absence of any explanation from you I must assume this was a planned and sophisticated criminal enterprise.
"You say you had no idea who these people were or what was going to happen to the money. I regret I cannot accept this statement."
The judge told Channa that while his guilty pleas would attract some credit, “the evidence against you is quite overwhelming”. His confession, age, remorse and the fact he had not made a penny from his dishonesty were among the few other things in his favour. Judge Rivlin compared the maximum 10-year sentence available to the 14 years that could be passed for handling and burglary. But he said he must nevertheless "do all that I can to deter those employed by financial institutions from committing such offences". He added: “Where anyone acting in flagrant breach of trust and attempts to steal many millions of pounds, the sentence will inevitably be a very long one."
Detective Sergeant Martin Peters said: “This crime is believed to be one of the largest frauds of its kind and it is thanks to the prompt response of the police and the banks that the money was recovered. “The City of London Police takes a robust stance against members of staff that abuse their position and steal from their employer.”
The attempted fraud occurred at a sensitive time for the banking sector. It took place just months after Societe Generale, the French bank, alleged that trader Jerome Kerviel lost €4.9 billion (£3.8 billion), while Credit Suisse later revealed that some of its traders had caused pricing errors leading to a $2.85 billion (£1.4 billion) writedown.

Bankruptcies for the first six months totalled 6,022, while combined liabilities climbed 17.4 percent to 3.019 trillion yen (28 billion dollars) compared with the same period last year, Teikoku Data Bank said.number of corporate bankruptcies in Japan rose 11.6 percent in the first half of 2008 with the number of cases related to higher material prices hitting a record high, researchers said on Tuesday.June saw 1,065 bankruptcies leaving liabilities of at least 10 million yen each, up 7.1 percent from 994 cases in May, the research firm said in its monthly report.However, combined liabilities in June was down 1.9 percent from the previous month to 471.92 billion yen, but was still 40.3 percent up on the same period last year, it said.
Bankruptcies in construction stayed at a high level due to declining orders for public works and rising material prices, the report said.The number of business failures related to the recent surge in raw materials costs reached a record high of 54 cases in June, when oil prices hit a record high of 140 dollars, up 40 percent since early 2008, it added.Corporate failures are expected to continue to increase and the pace accelerate, which will severely impact small and mid-sized firms, the research firm said.Japan has since 2002 been in its longest post-war economic expansion, but that "is about to end," Teikoku Data Bank said."In addition to the construction industry, small retailers are expected to face a period of tough conditions... as recent consumer surveys show household spending expected to decline," it added."Demand from overseas is falling, meaning more manufacturers are expected to go out of business."Top Japanese executives are at their most pessimistic in almost five years as soaring costs, a slowing global economy and a stronger yen pile pressure on profits that are expected to drop this year, the central bank said last week

Making money makes reputations at investment banks, but the numberless ways in which high-profile traders can lose eye-popping sums is making the case for much sharper focus on the unglamorous role of the risk control units.
Despite a regular crop of scandals and errors, from unauthorised positions to "fat-fingered" trades, there is insufficient investment in systems to monitor traders and prevent unacceptable losses, said Giles Nelson, co-founder of trading technology provider Progress Apama.
"If you look at surveillance of trading behaviour, it's somewhat seen as a Cinderella," said Nelson.
"The real focus is on the exciting stuff, on making money, making deals ... That's where the investment in technology is."
Yet the same traders can also lose a bank billions of dollars by circumventing the rules.
Trading limits can be broken or errors hidden as unloved risk managers, often equipped with inadequate technology, struggle to impose controls on risk-loving traders.
Unauthorised and undetected trading by a junior trader at Societe Generale earlier this year cost the French bank as much as 4.9 billion euros ($7.69 billion).
A common mistake is to misprice products or deals, either deliberately, or due to a lack of liquidity or market data, or by the inadvertent typing of an extra zero.
Just last week Canada's Toronto-Dominion Bank took a $90 million hit when a trader mispriced financial derivatives, while in June, Wall Street bank Morgan Stanley suspended a London-based credit trader who had overvalued positions by $120 million.
In May, Lehman Brothers suspended two London equities traders after identifying a similar problem.
THE ALPHA TRADER
The problem, said Nelson, is partly because banks are wary of imposing too many controls on traders and so stifling innovation or prompting them to walk to more lax competitors.
It is also very difficult to challenge the processes of a division that is a major revenue earner, said Brian Sentance, chief executive of Xenomorph, supplier of data management technologies.
Existing safeguards struggle to keep up with the evolution of financial products and transactions and the proliferation of trading venues, and are often run on a series of independent spreadsheets or databases, which inevitably makes a bank vulnerable to errors or malfeasance.
Sentance said some of his clients were already updating their risk systems. But banks still need to give risk managers greater power and invest more heavily in data and risk management technologies and procedures, Nelson said.
"(Banks realise that) if we don't, then not only are we going to suffer reputationally and the regulators will come down harder on us, but we will lose significant amounts of money eventually," Nelson said.
But some circumstances might always prove difficult to guard against.
"If you're sitting there doing a crossword and you put the paper on the key, boof-boof-boof-boof, it can go right off ... You can just keep trading and trading and trading," said one London-based trader

Mortgage lender IndyMac Bancorp Inc said on Tuesday depositors had been withdrawing cash at an "elevated" pace since a key U.S. senator questioned its ability to survive the housing crisis.
IndyMac shares sank 38 percent to 44 cents. A collapse of the largest independent, publicly traded U.S. mortgage lender could prove a headache for U.S. regulators since more than $17 billion of its deposits carry federal insurance.
Paul Miller, a Friedman, Billings, Ramsey & Co analyst, said shareholders may be wiped out, citing IndyMac's decision to stop most mortgage lending and inability to raise capital. Miller cut his price target for the stock to zero from $1.00.
"It's hard to gauge how this situation will resolve itself," said Christopher Wolfe, managing director at Fitch Ratings. "We see a high likelihood of some kind of regulatory intervention occurring, which could result in asset dispositions, or the thrift going into receivership."
When asked if the White House was involved in interagency discussions or considering any action, a spokesman responded: "This is an issue for the Fed."
Prospect Mortgage, a Northbrook, Illinois-based affiliate of private equity fund Sterling Partners, said late on Tuesday it agreed to buy more than 60 IndyMac retail mortgage branches, which employ 750 people, for an undisclosed price.
In a regulatory filing, IndyMac said it still faces "elevated levels of deposit withdrawals." It pointed to comments in late June from Sen. Charles Schumer, who chairs Congress's Joint Economic Committee, raising questions about a possible collapse. Schumer reiterated his concerns on Tuesday.
IndyMac said it was working with regulators on a new business plan after losing $896 million in the nine months to March 31. "We are aware of the situation and are working closely with the institution," said a spokesman for the Office of Thrift Supervision, IndyMac's main federal regulator.
Big mortgage rivals New Century Financial Corp and American Home Mortgage Investment Corp filed for bankruptcy protection last year. Countrywide Financial Corp, the top U.S. mortgage lender, avoided possible collapse when it was acquired last week by Bank of America Corp.
"In short, IndyMac was a junior version of Countrywide," Schumer said in a statement on Tuesday.
"IndyMac fueled its growth through unsound lending practices," the New York Democrat continued. "Regulators should consider ways to implement stricter oversight over the lending system so that there isn't another IndyMac."
IndyMac reported $17.3 billion of its deposits were insured by the Federal Deposit Insurance Corp. The FDIC has $52.8 billion in its insurance fund to cover bank failures.
FDIC Chairman Sheila Bair told the Senate Banking Committee last month that the housing downturn could cause "institutions of greater size than we have seen in the recent past to fail."
SEEKING SECURITY
IndyMac set plans on Monday to eliminate 3,800 jobs, or 53 percent of its work force, and stop offering most home loans.
It also projected a larger loss in the second quarter than the $184.2 million loss it posted for January to March.
Regulators concluded the company is not "well-capitalized," and IndyMac has about $1.7 billion of operating liquidity, a regulatory filing showed. A bank is considered well capitalized when it has an equity capital ratio over 6 percent.
IndyMac had a ratio of 5.76 percent on March 31. It needs to keep its capital ratio between 4 percent and 6 percent, according to Douglas Landy, a banking partner with law firm Allen & Overy, "in order to remain adequately capitalized and avoid being subject to greater regulatory sanction."
U.S. banking law gives regulators increasing power over institutions as their capital levels dwindle over time.
IndyMac once specialized in "Alt-A" loans that often don't require borrowers to document income or assets.
IndyMac's $77 billion of mortgage loans in 2007 gave it a 3.2 percent market share, ranking ninth nationally, according to newsletter Inside Mortgage Finance. But as rates rose and home prices fell, many borrowers found themselves unable to refinance, and defaults surged.
IndyMac shares have skidded 99 percent in the past year, cutting its market value to $44 million from $3.3 billion.
HANGING IN
Fitch on Tuesday cut its issuer default ratings for IndyMac Bancorp to "CC," a low junk grade, from "B-minus," and for IndyMac Bank to "CCC" from "B."
The rating agency also assigned IndyMac's roughly $720 million of uninsured deposits an "average" recovery rating, suggesting uninsured depositors might get 31 percent to 50 percent of their money back.
Patricia Lannom, a retiree, said she decided to keep her $100,000 IndyMac certificate of deposit after employees at a branch in Torrance, California, said the funds were FDIC-insured.
"I think somebody will buy them if they go under," she said. "What else can I do but hang in there?"
FBR's Miller said the stock price might succumb to falling home prices, rising credit losses, rating agency downgrades, and IndyMac's decision to curb lending. "We do not believe that there is any value left for common shareholders," he wrote.
IndyMac faces several shareholder lawsuits that accuse it of misleading investors about its financial condition.
The company said it plans to keep offering reverse mortgages to older borrowers through its Financial Freedom unit, and operate 33 branches in Southern California. (Additional reporting by Dena Aubin and Martha Graybow in New York, and Rachelle Younglai in Washington, D.C.; Editing by Braden Reddall abd Andre Grenon)

Merrill Lynch (MER) has garnered the nod as an outlier among investment banks in terms of credit worthiness. But it’s a dubious distinction, at best. Ratings agency Fitch indicated it may move to cut its credit rating on Merrill’s long-term debt - a prospect it basically erased for the other three major investment banks. Citing the scope of the long-term credit that comes due next year, Fitch placed Merrill’s long-term issuer default ratings on rating watch with a negative bias, a move that often presages an upcoming cut in the credit rating itself. Fitch expressed pessimism about the prospects for Merrill’s fixed-income, currency and commodity operations, which it said could off-set strength in areas like Merrill’s retail brokerage operations. The rating agency also said that it anticipated further write-downs from Merrill’s exposure to its residential mortgage and monoline insurance exposure, which diminish expectations for a sustainable return to core profitability. Merrill shares traded down nearly 3%, though - to be fair - even the investment banks that weren’t put on rating watch suffered declines in Wednesday’s trading.

Halifax said house prices had fallen by more than 6 per cent during the last year, having fallen 2 per cent in the last month. The average property now costs around £180,000. Mortgage rates have already hit their highest level for eight years, according to the Bank of England. The average rate on a two-year fixed rate mortgage has risen from 6.26 per cent to 6.63 per cent.
The pain is set to continue as lenders tighten their lending criteria. For example, Alliance & Leicester still allows homeowners to opt for a term of 40 years on their mortgages but affordability will be calculated as if you were paying it back over 25 years. Ray Boulger of mortgage brokers John Charcol, said: "Today's Monetary Policy Committee (M per cent ) decision to keep the bank rate unchanged at 5 per cent was widely expected. With increasingly bad economic news almost daily from most sectors of the UK economy a rate cut is badly needed to help restore some confidence but the expectation of further increases the inflation is a major constraint on the MPC.
"However, the dire economic news probably means that the MPC is no longer seriously considering increasing bank rate and so the main question is how long will we have to wait for the next cut. The MPC will be watching the price of oil and other commodities very closely." Jonathan Cornell, of mortgage brokers Hamptons Mortgages, said the Bank of England had been under tremendous pressure from two sides. "On one side inflation at 3.3 per cent is significantly above the bank's 2 per cent target and the Governor had to write an explanation letter to the Chancellor on June 16," he said."On the other side, a chronic lack of mortgage funding has led to house prices falling month on month. The majority of the inflationary pressure is linked to the rising price of oil, the price of other energy and food." Richard Cotton, senior partner at estate agents Cluttons, said: "The bank's decision to maintain rates suggests that it is continuing its laissez-faire attitude of the last two months, and failing to take positive action to deal with the current downturn in the property market and the wider economy. "The property industry needs to hear a positive message from the bank, that it understands the difficulties in the industry and is doing something about it. "Maintaining rates at 5 per cent will not give consumers any confidence in the bank's ability to manage this crisis, which will result in a worsening of current conditions in the property market and wider economy." But savers should be able to benefit with rates at a seven-year high as high street banks which are struggling to raise funds on the money markets try to attract large inflows of cash. As a rule, the highest paying accounts are run online as banks without high street branches have fewer overheads. Those customers who can afford to lock up their money for the minimum of a year will also receive preferential rates. Savers should be aware however that while bank failures are extremely rare, savers might want to bear in mind that the Government will only underwrite the first £35,000 of your savings in any one bank. This limit often applies to all the different brands operated by one bank.

after five years the Supreme Court put an end to the proceedings that led to bank fraud convictions in the Baninter case, when it upheld the verdict against the main defendants. Dominican society kept close tabs during this long process to prosecute the Baninter US$2.5 billion fraud, which led to the world’s biggest bank collapse per capita, and put the country’s judicial system to the test.Central Bank legal consultant for banking fraud, Fidel Pichardo Baba, said the case’s result sets an historical precedent which fortifies the Judicial Branch and is also an example that justice must be equal for all. "This decision just now shows that it’s possible to condemn whoever commits a crime regardless of standing and that the very next day the sun rises at the same hour and the Earth doesn’t shake," Pichardo said of former Baninter president Ramon Baez Figueroa, and the executives Luis Alvarez Renta, Marcos Baez Cocco, and Vivian Lubrano del Castillo.

New chief executive of IndyMac Bancorp, brought in by the government to manage the failed bank, said new lending standards should prevent the kind of problems that have brought down credit markets.John Bovenzi, the chief operating officer of the Federal Deposit Insurance Corp., reassured consumers that bank failures have been rare in the past, and that if more banks do fail, the government has enough in reserve
"I think the important point to make is that, historically, only a very small percentage of the banks on our problem banks list ever failed," he said on CNN late Sunday. "While there are 90 banks on the list, there would be no expectation that 90 of those banks would fail."Bovenzi took the helm of what will be IndyMac Federal Bank when the government stepped in late Friday afternoon to save the struggling institution.The Office of Thrift Supervision transferred control of IndyMac to the FDIC because it did not think the lender could meet its depositors' demands.
IndyMac is the largest regulated thrift to fail and the second-largest financial institution to close in U.S. history, regulators said after taking control of the bank.As of March 31, IndyMac had $19.06 billion in total deposits.Bovenzi reminded consumers that all accounts worth $100,000 and less are automatically insured by the FDIC, which has $53 billion in insurance funds. And he noted that there are ways to structure accounts so that more than $100,000 is covered."If there are other bank failures in the coming weeks, I think the same message, if your accounts are under $100,000, you have absolutely nothing to worry about," he said. "You can still find ways to protect more if you like."Beyond $53 billion, he said the FDIC would have go to other banks to raise more money, adding that in that case, consumers could expect some of that to be passed on in fees."Well, obviously it's a difficult time and there were certainly institutions that made loans that shouldn't have been made," he said. "There are standards being put out, hopefully, at institutions with better underwriting going forward so that this problem doesn't repeat itself."

Investors are scanning the banking industry for signs of more trouble after the biggest U.S. bank failure in more than two decades. Last week, U.S. regulators seized California savings and loan company IndyMac Bank and its $32 billion in assets. Troubles are mounting so quickly at some of the country's 7,500 banks that as many as 150 could fail over the next year or so, analysts said. Healthier banks are expected to shut branches or merge.

A finance broker has been charged with stealing more than $23,000 from his employee in the Perth suburb of Northbridge.Police allege 23-year-old Brett Travis Wynne used internet banking facilities to transfer the money in 72 transactions from December last year.They say Mr Wynne had access to the finance company's bank account number and password.The transfers were discovered following an audit of the company's accounts.Mr Wynne has been charged with 72 counts of fraud.He is due to appear in the Perth Magistrate's Court today.

European stocks fell the most in a week after record oil prices dimmed the earnings outlook for airlines and carmakers and a slowing housing market weighed on Schneider Electric's sales.
Air France-KLM and Daimler slipped the most in a week after crude climbed above $US117 a barrel. Schneider Electric, the world's biggest maker of circuit breakers, posted its biggest drop since January as sales missed analysts' estimates. Royal Bank of Scotland led banks lower after saying it may sell shares to shore up capital, while Barclays declined on a Merrill Lynch downgrade.
Europe's Dow Jones Stoxx 600 Index lost 1.2% to 316.96, extending this year's decline to 13% on concern that rising energy costs and $US290 billion in writedowns and credit losses at financial companies will cut profit growth.
''Oil prices account for a large proportion of costs for many companies,'' said Chirin Gill, a fund manager at Daiwa SB Investments in London, which has about $US60 billion. ''Prices are likely to be stronger for longer, which is hurting the stocks.''

European companies will see their earnings shrink in 2008 for the first time in six years, according to analysts' estimates compiled by Bloomberg. Profit for companies in the Stoxx 600 may drop 0.5%, the data show. That's down from 11% growth forecast at the end of last year.

Some European banks may have exacerbated financial market turmoil resulting from a global credit crunch by failing to come clean about their exposure to risky assets, a top European Union banking supervisor said Tuesday.
The Committee of European Banking Supervisors has analyzed 20 big cross-border banks in Europe and is concerned by some of its findings, particularly how the banks value and disclose investments whose markets have dried up because of the credit squeeze.
"Our preliminary findings show there are differences in terms of content of disclosure and presentations banks make in statements," Kerstin af Jochnick, head of the committee, told the European Parliament's economic affairs committee.
"Lack of consistency in banks' valuations, uncertainty about their accuracy and inadequate transparency may have contributed to the lack of confidence of market participants and exacerbated the market turbulence," said Jochnick, who is also an official with the Swedish banking supervisory body.
"We have seen there is still significant stress in the market," she said.

The HSBC banking group has admitted losing a computer disc with the details of 370,000 customers. The disc was lost four weeks ago after being sent by courier from the bank's life insurance offices in Southampton. The customers' details included their names, dates of birth, and their levels of insurance cover. However, there were no addresses or bank account details and HSBC said the customers' exposure to potential fraud was limited."We are looking into it and basically it has got lost from A to B," said an HSBC spokesman. "The reinsurer we sent it to is doing a thorough search for the disc. We will do anything we can to find it." "There are no financial details there in terms of banking details. There are no address details or anything like that," he added. As well as name, date of birth and value of the cover, the documents revealed only the customer's policy number and whether or nor the customer was a smoker.”
HSBC is claiming that customers’ exposure to potential fraud will be limited. I think that that ‘limit’ will be determined once the investigation has been completed. However, if the disc fell into the hands of professional identify thieves, the potential for fraud will not be limited.

The latest edition of the Banking Code, the voluntary consumer-protection standard for UK banks, was released last week. The new code claims to “give customers the most up to date information on how to protect their accounts from fraud.” This sounds like a worthy cause, but closer inspection shows customers could be worse off than they were before.Clause 12.11 of the code deals with liability for losses:
If you act fraudulently, you will be responsible for all losses on your account. If you act without reasonable care, and this causes losses, you may be responsible for them. (This may apply, for example, if you do not follow section 12.5 or 12.9 or you do not keep to your account’s terms and conditions.)Clauses 12.5 and 12.9 include some debatable advice about anti-virus software and clicking on links in email (more on this in a later post). While malware and phishing emails are a serious fraud threat, it is unrealistic to suggest that home users’ computers can be adequately secured to defeat attacks.Fraud-detection algorithms are more likely to be effective, since they can examine patterns of transactions over all customers. However, these can only be deployed by the banks themselves.
Existing phishing schemes would be defeated by two-factor authentication, but UK banks have been notoriously slow at rolling out these, despite being widespread in many other European countries. Although not perfect, these defences might cause fraudsters to move to easier targets. Two-channel and transaction authentication techniques additionally give protection against man in the middle attacks.
Until the banks are made liable for fraud, they have no incentive to make a proper assessment as to the effectiveness of these protection measures. The new banking code allows the banks to further dump the cost of their omission onto customers.
When the person responsible for securing a system is not liable for breaches, the system is likely to fail. This situation of misaligned incentives is common, and here we see a further example. There might be a short-term benefit to banks of shifting liability, as they can resist introducing further security mechanisms for a while. However, in the longer term, it could be that moves like this will degrade trust in the banking system, causing everyone to suffer.
The House of Lords Science and Technology committee recognized this problem of the banking industry and recommended a statutory change (8.17) whereby banks would be held liable for electronic fraud. The new Banking Code, by allowing banks to dump yet more costs on the customers, is a step in the wrong direction.

Veronica Fong, 44, appeared in Sydney's Central Local Court yesterday facing 22 charges of obtaining money by deception.Fong, of Baptist Street, Redfern, is accused of taking the money from the Montgomery Street bank over an eight-year period between 2000 and 2008.The mother of one, who started working at the bank in March 1987, was arrested on Tuesday April 8 after the police phoned her and asked her to go to the City Central police station. Fong, who was sacked by the bank this week when the allegations came to light, worked as a client co-ordinator in the private division for most of her career, apart from in 2006 when she was the senior lending officer for specialised mortgage solutions.Her duties included updating and granting temporary overdrafts. She is accused of granting $1,432,071.58 to accounts in her husband's and father's names.As part of her job Fong trained staff and she is said to have accessed the St George banking computer system when her colleagues were logged on in their names. No other staff were aware of the alleged fraud, police said.The alleged offence was detected via a random audit conducted by the bank.
Fong did not enter a plea yesterday and she was released on bail after a surety was put up in her name. She is due to appear at Downing Centre Local Court on April 22.

German financial-market regulator BaFin ordered Weserbank AG to stop doing business, making it the first German bank to close since the subprime crisis started.BaFin said it closed the Bremerhaven, Germany-based bank to preserve remaining assets and started insolvency proceedings. The lender is over-indebted and would struggle to cover operating costs, BaFin said.Weserbank, founded in 1912 as a cooperative lender for butchers and cattle dealers, is the first German lender since 2006 to file for insolvency.

Oasis Hong Kong Airlines, a long-haul budget carrier that tried to offer premium service and spacious seats at low prices, suddenly went into liquidation on Wednesday and canceled all flights.
It was the fourth budget carrier worldwide to halt operations in the last week and a half. The bankruptcy filing by Oasis stranded thousands of passengers in Hong Kong, London and Vancouver.High jet fuel prices have taken a heavy toll on the airline industry and particularly on low-margin budget carriers trying to compete on price. The three others to shut down since March 31, all in the United States, were Aloha Airgroup, ATA Airlines and Skybus Airlines.

The financial industry in the United Kingdom recently reaffirmed a policy that holds online banking customers liable for losses if they fail to secure their personal computers against data-stealing computer viruses. While this policy may seem surprising or even draconian to some Americans, the reality is that most U.S. consumers remain woefully uninformed as to their own security liabilities when banking online. News of the new U.K. banking codes comes via The Register, which reported that under the new regulations "banks will not be responsible for losses on online bank accounts if consumers do not have up-to-date anti-virus, anti-spyware and firewall software installed on their machines." The full text of the updated banking code is here (PDF). The relevant sections are 12.5 through 12.13.
This touches on a question Security Fix receives quite often from readers: "If my computer gets hacked and someone uses it to steal money from my online bank account, will I get that money back?" The answer is that beyond the protections afforded to consumers under the law, whether or not consumers are reimbursed for online banking losses due to computer intrusions is entirely at the discretion of the banks.
By law, U.S. consumers can get reimbursed for any funds fraudulently transferred out of their accounts if they notify their financial institution of the bogus debits within 60 days of the transaction first appearing on their bank statement. Provided victims alert their banks within that time frame, their liability is generally limited to $50 (this applies only to consumers; businesses typically aren't afforded anywhere near that amount of flexibility).Check the service agreement tied to nearly any U.S.-based online banking service and you will see roughly the same thing. Take this disclosure, from Bank of America's online banking agreement:
"If you do not notify us within these 60 days, you may not be reimbursed for subsequent transactions. Additionally, we will reverse or reimburse you for any bank or payee fees resulting from your loss. You should always guard your Online ID and Passcode from unauthorized use. If you share this information with someone, all transactions they initiate with the information are considered as authorized by you, even for transactions you did not intend for them to make."
It remains to be seen whether U.K. banks will enforce the tough new policy on consumer liability. But to be fair, most banks in the U.K. have taken concrete -- albeit hardly foolproof -- steps to employ true two-factor authentication methods for verifying that the person logging into a bank account online is in fact the owner of said account. The same is largely not true for financial institutions in the United States today, and this is principally due to the fact that U.S. banking regulators here haven't required such measures. Rather, they have left it up to the banks to determine their appropriate risk levels and which back-end and customer-facing anti-fraud technologies should be deployed.
According to APACS, the U.K. payments association that reports banking fraud and loss statistics for financial institutions there, stricter measures are helping to bring down the cost of online banking fraud. In March, APACS reported that online banking fraud losses totaled £22.6m in 2007 -- a 33 percent decrease from 2006 losses. Unfortunately, it's not possible to correlate that figure with fraud numbers from U.S. banks, because they're not required to report those numbers, and our government sadly does not publish much of the information it does have on the subject (save for the odd internal report that leaks out to the media once in a blue moon).If you think the U.K. rules are too strict, consider the recent actions by some banks in Brazil, a country that has a phenomenally active and organized cyber criminal element that produces some of the world's most advanced malware targeting online banking customers (mercifully, the Brazilian cyber crooks generally stick to picking on their own citizens). I spoke recently with Tony Reyes, founder of the New York-based ARC Group, a company that has set up a shop in Brazil to help at least one financial institution there investigate customers who have had their online accounts cleaned out as a result of cyber cime. Reyes, a former cyber cop for the NYPD, said some of Brazilian banks have taken to investigating the victims of online financial crime."Some of these Brazilian banks are hiring investigators to visit the customer's house and look at the security of their setup, and if [the customer] doesn't have software patches, a firewall and up-to-date anti-virus on his system, in a lot of cases the banks will turn around and say it was the consumer's fault, and [the banks] don't return the money," Reyes said.

A report from the International Monetary Fund (IMF) shows that British banks will have to take an extra £11 billion from sub-prime losses - in addition to the £9.6 billion write-downs already announced.
UK lenders are sitting on far larger undisclosed mortgage-related losses than its European counterparts, according to figures in the Global Financial Stability report. In comparison, lenders in the US and the rest of Europe have already revealed their losses. In Europe, top lenders will probably total around £6 billion of additional losses while lenders in the US could report a further £25 billion of write-downs, but that is only half the figure they have already confessed to.
Earlier this week, the IMF warned that losses from the worldwide credit crunch could reach $1 trillion (£500 billion).
Experts have tried to estimate the cost of one of the worst financial disasters in history but have not exceeded $600 billion. The trillion figure (a million billion) will result in requests for further state intervention to balance credit markets.
Commenting on the report, IMF official Jaime Caruana said the credit shock emanating from the US sub-prime crisis is set to broaden amid a significant economic slowdown.
With a weakening economy, write-downs and prospects for further losses are placing additional pressure on banks’ balance sheets, which may limit their capacity to lend. Britain is particularly vulnerable to the cash crunch because of its over extended property market, concluded Mr Caruana.

Financial Times of London Friday that there are more shoes to drop in the credit crisis if authorities don’t prepare to head them off. One area is credit default swaps:

“Instead of reshuffling regulatory agencies, the authorities ought to prepare for the next shoes to drop …. There is an esoteric financial instrument called credit default swaps. The notional amount of CDS contracts outstanding is roughly $45,000 billion … The market is totally unregulated and those who hold the contracts do not know whether their counterparties have adequately protected themselves. If and when defaults occur, some of the counterparties are likely to prove unable to fulfill their obligations. This prospect hangs over the financial markets like a sword of Damocles that is bound to fall, but only after some defaults have occurred … One possible solution is to establish a clearing house or exchange with a sound capital structure and strict margin requirements to which all existing and future contracts would have to be submitted.”

Adam Applegarth joined the ranks of chiefs rewarded for spectacular failures when it emerged that he will pocket £760,000 after being sacked in December as Northern Rock's chief executive.Mr Applegarth's package includes a £2.6 million pension – despite overseeing a £167.6 million loss. A third of the bank's 6,000-plus jobs will disappear as it attempts to rebalance its books and repay £24 billion in government loans by 2010.The pay-off – which gives him £63,333 a month until November– is on top of the £785,000 he earned in 2007 and the £1.36 million in 2006.
Vince Cable, the Liberal Democrat treasury spokesman, branded the compensation an "utter disgrace".He said: "This is a straightforward case of reward for failure. The chief executive who led the disastrous business strategy is being generously rewarded for failures of leadership whereas shareholders get nothing and large numbers of workers are being made redundant."Labour MP Kevan Jones, whose North Durham constituency includes many of the workers facing the sack, called on Mr Applegarth to surrender the cash.He said: "I find it incredulous that a man who has already made millions will be paid this amount of money. It will appear to the average person that he is being rewarded for failure."Northern Rock said Mr Applegarth's termination payment, which emerged with the publication of its annual accounts for 2007, was "substantially less" than he was due.
But Mr Applegarth will continue to enjoy a staff discount on his mortgage and can reclaim almost £6,000 in legal fees. The accounts also reveal that his home has been fitted with £5,000-worth of security measures since the bank's collapse. He joins the growing number of executives receiving huge pay cheques despite their record in office being held in contempt.Sir John Gieve, the deputy governor of the Bank of England, tops a list of shame compiled by the Taxpayers' Alliance by taking home £234,467 last year – when he was accused of failing to prevent Northern Rock's descent into crisis. Labour MP John McFall said Sir John had been "asleep in the back shop while there was a mugging out front".Health Secretary Alan Johnson suspended a £150,000 pay-out to Rose Gibb, who resigned as chief executive of Maidstone and Tunbridge Wells NHS Trust after an outbreak of Clostridium difficile killed 90 people. Roger Lawson, the chairman of the Northern Rock Shareholders Association Group, said: "A lot of shareholders will be very unhappy with the size of Mr Applegarth's pay-off but it looks like, legally, the company could not have avoided paying that amount.
"Had Mr Applegarth taken the company to court then it could have ended up having to pay him even more, so perhaps it has got away with having to pay slightly less than its legal obligation, so I have to be philosophical about it."

The corporate watchdog is investigating allegations of fraud and manipulation against the head of Opes Prime, which was put into receivership last week owing $1 billion to lenders. The Australian Securities and Investments Commission (ASIC) is looking into allegations that Opes Prime Chief Executive Laurie Emini instructed staff to falsify the accounts of six wealthy clients to help prevent them from personal losses of up to $200 million, according to a transcript of court documents from a Federal Court hearing last Friday. The collapse of Opes Prime is the biggest of its kind in Australia since the global credit crunch took hold in August last year. Opes Prime's problems stemmed from severe and sustained financial market volatility, which continues to adversely affect some market participants.
ASIC sent a special team into Melbourne-based Opes Prime late last week after the group was placed into receivership by creditor Australia & New Zealand Banking Group after "irregularities" in trading accounts were uncovered.
A senior ASIC investigator, Richard Vandeloo, told the Federal Court that Opes staff were instructed to falsify trading accounts so that the group's high net worth clients would avoid margin calls, according to the transcript.
"Based on conversations of the receiver's staff with employees of the stockbroking company (Thursday), I'm advised that Mr. Emini, over a three month period between December last year and February this year, instructed various staff to make entries in clients of high net worth to avoid margin calls being made...," Vandeloo said.
He said that staff were instructed to change the loan-to-value ratio within the group's client portfolio. Traders said this would make the portfolio appear healthier than it was. Vandeloo also said there are allegations that there may have been a "round robin" of stocks to cover the positions of the clients in question.
When asked by judge Ray Finkelstein if there was any suspicion that the clients were involved in the alleged falsification of accounts, Vandeloo said: "In relation to ... one client worth A$145 million, there is business connections between Mr. Emini and that particular client." After being pressed by the judge about whether there was any suggestion by staff or the receivers that the clients were involved, Vandeloo said: "Of the six they have only made that suggestion in relation to one."
Vandeloo also said there were allegations of the falsification of company records, which could include accounting records. A spokeswoman for ASIC said the investigation is continuing. The comments were made at a hearing where ASIC sought an order preventing Emini from leaving Australia.
When Opes Prime was put into receivership it owed ANZ $650 million and Merrill Lynch & Co. a further $350 million, receiver Deloitte said last week.
Merrill Lynch and ANZ took control of Opes Prime's shares last week and started selling them off to recoup the loan amounts. Merrill Lynch has largely finished selling shares to cover its loan to the group, a person familiar with the situation said Tuesday. ANZ, which hired Goldman Sachs JBwere to handle the sales, has sold around 25% of the portfolio it received, according to the Australian newspaper. ANZ said last week it doesn't anticipate a material loss from its exposure to Opes.
Brokers who did not want to be named, but who have knowledge of the affected stocks, said ANZ took on shares in around 675 companies, including major stocks such as Westfield Group, QBE Insurance Group, Orica and Aristocrate Leisure. An ANZ spokeswoman declined to comment on this matter, as did a spokeswoman for Goldman Sachs JBWere. The ANZ spokeswoman said that the bank continues to realise "solid" value for the shares sold, consistent with the bank's objective to undertake an "orderly unwind" of the portfolio. A number of small and mid-cap companies, including Gindalbie Metals, have requested trading halts in recent days while they clarify the impact of the Opes collapse on shareholders who held shares through the brokerage.

``Conditions have become significantly more challenging during the last few weeks,'' Deutsche Bank said today in a statement. The Frankfurt-based company's shares, which have declined 17 percent this year, rose on speculation the worst of the losses in the banking industry may almost be over. Deutsche Bank AG, Germany's biggest bank, will write down 2.5 billion euros ($3.9 billion) of loans and asset-backed securities and said markets are deteriorating.
Deutsche Bank, which increased earnings in 2007, said a week ago its 2008 pretax profit target is under threat. Chief Executive Officer Josef Ackerman cited ``difficult'' market and economic conditions. UBS AG said today Chairman Marcel Ospel will depart after reporting an extra $19 billion of writedowns.
``The subprime crisis is catching up to Deutsche Bank,'' said Konrad Becker, a Munich-based analyst at Merck Finck & Co. who recommends holding the shares. ``This means that Deutsche Bank is at risk of reporting a first-quarter pretax loss.''
Deutsche Bank rose 2.9 percent to 73.81 euros at 1:05 p.m. in Frankfurt trading. The 60-member Bloomberg Europe Banks and Financial Services Index gained 2.2 percent, cutting this year's decline to 16 percent.
``The immediate stock reaction is hope among investors that we've touched bottom,'' said Derek Chambers, an analyst at Standard & Poor's Equity Research in London who has a ``hold'' rating on Deutsche Bank. ``Deutsche Bank shares are reacting more to the general financial sector trend than anything else.'' Deutsche Bank said today it will cut the value of leveraged-buyout and commercial real-estate loans and residential mortgage-backed securities in the first quarter. Markdowns on assets backed by residential mortgages ``principally'' involve 7.91 billion euros of so-called ALT-A mortgages, which fall between subprime and prime, the bank said.
``The market was prepared,'' said Thomas Nagel, a Frankfurt-based trader at Equinet AG. ``Bank stocks could even being nearing a turnaround because the drops have been exaggerated.'' Ackerman, attending a banking conference in London today, wouldn't answer questions. Deutsche Bank spokesman Christian Streckert cited last week's annual report when asked today about the 2008 pretax profit forecast of 8.4 billion euros, which excludes one-time effects. The bank on March 26 said writedowns and a worsening economy would ``adversely affect our ability to achieve our pretax profitability objective.''

Another crackdown on Asian football betting syndicates which are said to be “controlling” European major league results is on the cards. With the coming Euro 2008 competition to be held this summer, Interpol is seeking the cooperation of police forces from several Asian countries to carry out raids. Interpol secretary-general Ronald Noble said in Singapore yesterday that Interpol was planning to launch a second operation to curb illegal football gambling in Asia following last year’s success which netted US$680,000 (RM2.24mil) of suspected criminal proceeds. He was quoted by AFP as saying that more countries would be involved in the second operation against football gambling, which was one of the most rampant organised crimes in the region. The first operation, codenamed ”Soga”, was launched last October and involved 266 raids in Australia, China, Hong Kong, Macau, Malaysia, Singapore, Thailand and Vietnam and resulted in more than 430 individuals arrested and 272 underground gambling dens shut down. Speaking at the Global Conference on Asian Organised Crime hosted by the Singapore police force, Noble said the gambling dens that were closed handled an estimated US$680mil in illegal bets worldwide.As an indication of how widespread football gambling is, European football’s governing body UEFA had asked European police to investigate the results of at least 26 matches last year which were suspected to have been manipulated by Asian betting syndicates. Noble said that while the amount of money involved in match-fixing was unknown, UEFA claimed that an overseas syndicate made US$5mil (RM16.5mil) on one championship match alone last July. Malaysian police and the Malaysia Communications and Multimedia Commission (MCMC) are working together to identify syndicates using the Internet to accept football bets. Inspector-General of Police Tan Sri Musa Hassan said a task force has been set up and CID officers were currently monitoring suspected illegal bookmaking syndicates involved in accepting football bets via the Internet. “Syndicates here operate using servers from other countries and that is why it is difficult for us to trace and nab the main culprits. “That is why we have now asked our Asean counterparts as well as other police forces in the Asian region to provide us with information on syndicates linked with our country,” he told The Star. Musa said police here would exchange information with their counterparts worldwide. About 200 participants from various law enforcement agencies of 32 countries, including Malaysia, attended the two-day conference.

Last week The New York Times quoted Konrad Hummler, the managing partner of Wegelin & Company, a small private bank in the canton of St. Gallen.The nervous Herr Hummler warned that Switzerland's role as secret banker to the world’s wealthy is under threat as never before, as he sees it. Hummler said what we all know -- that the German tax evasion scandal involving Liechtenstein has been manipulated by the media into a debate about Swiss banking secrecy, just as Europe's Leftists wanted. Worried at the degree to which the traditional discretion of Swiss banks is under assault, Hummler said his foreign clients have been inquiring about their money. The nervous Herr Hummler says that this time, Switzerland may not be able to stop the rest of the world from prying open Swiss banking.

The Bush administration is finalizing details of a plan to rescue thousands of homeowners at risk of foreclosure by helping them refinance into more affordable mortgages backed by public funds, government officials said.
The proposal is aimed at assisting borrowers who owe their banks more than their homes are worth because of plummeting prices, an issue at the heart of the nation’s housing crisis. Under the plan, the Federal Housing Administration would encourage lenders to forgive a portion of those loans and issue new, smaller mortgages in exchange for the financial backing of the federal government.
The plan is similar to elements in legislation proposed two weeks ago by Barney Frank (D-Mass.), who chairs the House Financial Services Committee, officials said. Administration officials said they believe they can accomplish some of the same goals through regulatory changes, though important details have yet to be nailed down. If enacted, the plan would mark the first time the White House has committed federal dollars to help the most hard-pressed borrowers, people struggling to repay loans that are huge relative to their incomes and the diminished value of their homes. That may offer encouragement to the banking industry and help silence Democrats, who have accused the White House of rescuing Wall Street investment banks while ignoring distressed homeowners. But it could agitate conservatives, who are likely to view the FHA plan as yet another government bailout. Senior officials in several parts of the administration described the plan on condition of anonymity because the specifics are still being worked out. It is unclear when the plan will be formally unveiled, though one official said it was unlikely to happen before the president returns from a trip to Europe next week. “The administration for a long time had the idealists and the pragmatists. And because the market conditions are what they are right now, the pragmatists are looking at this and saying, ‘How can we achieve something?’ And they seem to be having more sway,” said Francis Creighton, vice president for government affairs at the Mortgage Bankers Association, which has been working with Frank on his proposal. The initiative now being crafted could provide relief to a select group of homeowners who are “under water” on their mortgages, a term that describes the situation when falling home prices leave borrowers with negative equity. These homeowners would have to agree to stay in their homes after refinancing, be able to afford the new monthly payments and have lenders who are willing to go along with the plan, officials said.
Administration officials have yet to iron out other details, such as how big the new mortgage should be relative to the home’s value. An estimated 8.8 million households currently have negative equity, due in part to the rise of loans that often required no money down. Negative equity becomes a problem when the homeowner can no longer make mortgage payments. If the homeowner had some equity, the loan could be refinanced or the house could be sold. But a homeowner who is under water cannot afford to do those things because the new loan or sale proceeds would not cover the cost of the existing mortgage. Treasury Secretary Henry M. Paulson Jr. signaled in a speech Wednesday that the administration was developing an initiative tailored to this specific problem, saying “the people we seek to help” are those who want to keep their homes but are falling behind on their payments. “If they also have negative equity in their homes, refinancing becomes almost impossible and so workouts become even more important,” he said. He credited Alphonso Jackson, secretary of the Department of Housing and Urban Development, with helping to craft the plan. In a recent report, Merrill Lynch identified negative equity as a prime cause of rising default rates, saying borrowers who already have poor credit records are often deciding it makes sense to walk away from their homes when the values fall. Federal Reserve Chairman Ben S. Bernanke has called on lenders to restructure some loans, arguing that it would be less costly to forgive some debt than to foreclose on the properties.

``We still maintain that we don't need capital, but we've realized that perception is the dominant issue in today's markets,'' Callan said.
``It's a step in the right direction,'' said CreditSights Inc. analyst David Hendler. ``If you're a smaller player, you need more capital to do business in tough times. They now need to show that they can keep churning profits in this environment.''
Lehman Brothers Holdings Inc. is seeking to raise at least $3 billion from a share sale it says should help quell concern about a shortage of capital that drove the stock down 42 percent this year.
Lehman is offering 3 million convertible preferred shares in a sale that will be ``an endorsement of our balance sheet by investors,'' Chief Financial Officer Erin Callan said in an interview yesterday. Demand for the stock was three times greater than the amount on sale as of 6:30 p.m. in New York, according to a person familiar with the offering who declined to identified before the sale ends today.
Lehman, led by Chief Executive Officer Richard Fuld, fell as much as 48 percent on March 17 on speculation the New York- based firm would face the same cash shortage that broke Bear Stearns Cos. following a run on the company. Merrill Lynch & Co., Citigroup Inc. and Morgan Stanley have also raised cash from investors after more than $200 billion of writedowns and losses tied to the collapse of mortgage markets at the world's biggest financial companies.
The 3 million of convertible preferred shares have a coupon of 7 percent to 7.5 percent, according to the person familiar with the offering. The stock fell 2.8 percent $36.66 in New York trading yesterday after the market's official close, while credit- default swaps declined, showing investors believe Lehman's ability to pay debts has improved. Lehman closed at $37.64 during the regular session yesterday. Credit-default swaps tied to Lehman's senior unsecured bonds narrowed 15 basis points after the announcement to 285 basis points, according to broker Phoenix Partners Group in New York. A decline signals improvement in investor confidence.


Terms of the deal include a conversion premium of 30 percent to 35 percent above the current stock price, according to people familiar with the offering. Final terms will be set when the sale is completed.

The capital increase will provide ``financial flexibility,'' the firm said in the statement. Lehman said on March 18 that it had $30 billion of cash and $64 billion in assets that could easily be turned into cash. The securities firm has access to an additional $200 billion from a Federal Reserve credit facility, according to Prashant Bhatia, an analyst at New York-based Citigroup. Bhatia upgraded his recommendation for Lehman to ``buy'' from ``neutral'' last week, saying the stock price drop was overdone.
``Reality will trump fear,'' Bhatia wrote on March 28. ``Lehman has ample liquidity to run its business.''
The firm's net income declined 57 percent in the quarter, less than analysts estimated, because of a $1.8 billion writedown on mortgage assets. Merger advisory fees jumped 34 percent, investment-management revenue surged 39 percent and equities rose 6 percent. Fuld, 61, has announced plans to cut 5,300 jobs, or 19 percent of the workforce, and closed mortgage units during the past seven months. He also has expanded in Europe and Asia to gain market share in stock trading as part of his initiatives designed to help Lehman grow faster than its peers once markets recover.
The firm now ranks as the largest trader on the London Stock Exchange and Euronext. Lehman has risen to fourth from sixth on the New York Stock Exchange and Nasdaq. Its share of U.S. bond trading has increased by 1 percentage point to 12 percent.
Bear Stearns, formerly the fifth-largest U.S. securities firm, was forced to sell itself to JPMorgan Chase & Co. this month at a fraction of its market value with financial support from the Fed. Merrill Lynch raised $6.6 billion in January by selling preferred shares to a group including the Kuwaiti Investment Authority and Japan's Mizuho Financial Group Inc.
Lehman announced the financing after the close of regular trading on the New York Stock Exchange, where shares finished 23 cents lower at $37.64.

A large current account deficit coupled with high inflation at a time when the housing bubble and consumer credit boom is about to come to a very abrupt standstill are all ingredients which we should be well aware of at this point. As can be expected this has also taken its toll on the financial sector which has played a seminal role in the recent Icelandic expansion. In this way, Iceland's three largest banks (Kaupting, Glitnir, and Landsbanki) have all seen their credit rating being scythed by the rating agencies recently. In one of their recent much appreciated daily digests Eurointelligence reports how credit default swaps have risen to alarming levels even if we should note that the three big Icelandic banks have branches in mainland Europe allowing them to potentially knock down the ECB's door for liquidity.

US banks are likely to fail as a result of the housing crisis, Ben -Bernanke said yesterday, warning that his country faced a more difficult situation than in the aftermath of the dotcom bust in 2001."There will probably be some bank failures," the Fed chairman told the Senate banking committee in his second day of biannual testimony to Congress.He said the banks at risk were "small and in many cases de novo [new] banks that are heavily invested in real estate in localities where prices have fallen".But he said: "I do not anticipate any serious problems" at any of the big banks, which played the most important role in the US financial system.The Standard & Poor's financials index declined 3 per cent yesterday.
Mr Bernanke, meanwhile, dodged efforts by senators to enlist his support for proposals to reform the bankruptcy code or use taxpayers' money to intervene directly in the mortgage market.He said it was worth "thinking about" additional steps but could not recommend any at this point, beyond existing proposals to modernise the Federal Housing Administration and reform Fannie Mae and Freddie Mac.
The Fed chairman said there were "some similarities with the 2001 experience" - in so far as this downturn, like the previous one, was being driven by a sharp fall in asset prices.But he said there were "important differences". The fall in house prices was creating a "much broader set of issues" than the slump in tech stocks did.
Falling house prices affected more consumers than falling stock prices, while the house prices had also caused a "sustained disruption in the credit market".Moreover, the US was in a weaker position to respond to the negative growth shock today than it was in 2001.

Battered Wall Street brokerage Bear Stearns said Friday that it is receiving short-term emergency funding to prevent its collapse. JPMorgan Chase & Co. and the Federal Reserve Bank of New York said they would provide Bear Stearns funding for up to 28 days, with the Fed providing the money to JPMorgan through its discount window.
With the credit crisis worsening, the government took action to prevent the investment bank from going under and igniting widespread panic through the financial markets.Bear Stearns (BSC, Fortune 500) shares plunged as much as 53% before moving off their lows to trade 39% lower in the early afternoon.The announcement did not indicate how much funding Bear Stearns would receive, but executives said in a conference call Friday afternoon that with the money, the firm will "have the ability to fund ourselves every day, to do business as usual."
"It's a bridge to a more permanent solution," said Chief Financial Officer Sam Molinaro Jr. During the call, Chief Executive Alan Schwartz said the firm's liquidity crunch hit Thursday, when many customers demanded cash after hearing rumors of trouble at Bear Stearns all week.Bear Stearns had already been working with investment bank Lazard & Co. to explore alternatives when the cash calls came in. The brokerage house decided to secure funding from JPMorgan to give it time to "get some more facts out to the marketplace and give people time to assess them," Schwartz said. The company, which is continuing to work with Lazard, also announced it is moving up the date of its first-quarter earnings release to Monday and provide more information about its current condition. Prior to Friday's announcement, the consensus among analysts was that the New York-based broker would post a profit of $135 million on revenue of $1.35 billion. Executives reiterated that they were comfortable with the range of earnings estimates.Schwartz said the firm's capital position, a measure of its soundness, is in "good shape

A second bank has failed this year, the Federal Deposit Insurance Corp. said Friday. The FDIC and the Commissioner of Missouri's Division of Finance closed Hume Bank in Hume, Mo., on Friday, the federal banking regulator announced.
It was the second bank to fail this year, the FDIC said. The first was Douglass National Bank in Kansas City, Mo., on Jan. 25.
The FDIC didn't give a reason for the failure.
Security Bank of Rich Hill, Mo., will assume Hume Bank's insured deposits. The failed bank's sole office will open Monday as a branch of Security Bank.
As of Dec. 31, Hume Bank had assets of $18.7 million and total deposits of $13.6 million. Security Bank agreed to assume $12.5 million of the failed bank's insured deposits for a premium of 4.26%, the FDIC said.

Former Morgan Crucible Co. Chief Executive Officer Ian Norris, who is accused by U.S. prosecutors of price-fixing, won a ruling from the U.K.'s highest court that hinders attempts to extradite him for a trial in Pennsylvania. Norris, 65, has been charged in the U.S. with conspiring with other executives to rig the price of carbon products, including brushes, in the 1990s and trying to obstruct an ensuing investigation. The House of Lords today ruled he couldn't be extradited on the antitrust claims because price-fixing wasn't a crime in the U.K. at the time of the alleged misconduct. ``Mere price fixing was not at any time'' a criminal offense in the U.K. when the cartel operated, the House of Lords said in a ruling today. While Norris doesn't have to face U.S. antitrust charges, the Lords said he may be extradited over the obstruction of justice claim and sent the issue to a lower court for review. Britain's business community lobbied the U.K. to prevent the U.S. from using an extradition treaty to prosecute white collar criminals after three former bankers at Royal Bank of Scotland Group Plc's Greenwich NatWest were extradited to Texas to face charges related to the collapse of Enron Corp. ``The House of Lords have signaled that the government should start to change its mind on extradition rules, particularly on America, which is very aggressive in terms of territorial reach,'' Mark Spragg, who represented the NatWest bankers, said in an interview today. His clients eventually pleaded guilty and were sentenced to 37 months in prison. While the U.K.'s Enterprise Act 2002 criminalized cartels, the law wasn't in force until after the alleged cartel activity had stopped in the Norris case.
The ruling is ``a huge defeat for the U.S. antitrust division,'' Larry Byrne, a U.S. lawyer for Norris, said today. ``The House of Lords has completely rejected the position of the'' U.S. Department of Justice. Following today's ruling, U.S. prosecutors who pursue British businessmen for antitrust violations must ensure the cartel was operating after the introduction of the Enterprise Act, said Tom Epps, a partner at Russell Jones & Walker. ``The business community needs to remain vigilant,'' Epps said. ``The Department of Justice will continue to flex its muscles in the U.K. by focusing on cartel offenses that have occurred post June 2003.''
Norris retired from Morgan Crucible in 2002 after battling prostate cancer. U.S. prosecutors claim he colluded with rivals to fix prices on carbon parts, to avoid undercutting each other on sales. The cartel, which originally operated in Europe, spread to the U.S. in 1989 and continued until 2000, according to a U.S. indictment.
Morgan Crucible, which was founded in 1856, sells ceramic and carbon parts for use in the steel-making industry. Current management has sought to expand the company into other markets such as aerospace, medical equipment and defense, CEO Mark Robertshaw said in an interview in December. A call to the Windsor, England-based company wasn't immediately answered. Morgan Crucible and its North Carolina subsidiary, Morganite Inc., agreed to pay a total of $11 million in fines to settle related antitrust charges in 2002. Norris wasn't covered by that agreement and has been fighting the charges since his arrest in London in January 2005. In a separate ruling today, the House of Lords applied the same principle to a U.K. antitrust case involving a group of generic drug-makers including Goldshield Group Plc for conspiring to defraud the National Health Service of 120 million pounds ($60 million) by fixing prices. The U.K.'s Serious Fraud Office claims that the cartel ran through 2000, prior to the Enterprise Act. The Lords said prosecutors must amend the charges if they want to continue with the case. Keith Hellawell, chairman of Goldshield said in a statement that ``we very much hope'' this will lead to the SFO dropping the charges. SFO spokesman David Jones said he wasn't immediately able to comment.

The cost of borrowing euros for three months rose to the highest level in seven weeks, adding to evidence central bank attempts to ease a shortage of cash in the money markets are misfiring. The euro interbank offered rate, or Euribor, for the loans climbed 7 basis points to 4.50 percent today, the European Banking Federation said. It was the biggest gain since Jan. 25. The one-week rate was little changed at 4.11 percent. The Federal Reserve said today it plans to increase loans to banks this month to offset ``heightened liquidity pressures'' and a deepening credit crisis. Money-market rates are rising as banks hoard cash after at least $188 billion in credit losses and writedowns linked to the U.S. subprime-mortgage collapse since the beginning of 2007. Credit-default swaps showed bank debt hasbecome more risky than corporate bonds. ``Nothing has actually been solved,'' said Padhraic Garvey, head of investment-grade debt strategy in Amsterdam at ING Bank NV, a unit of the biggest Dutch financial-services company. ``An elevated Euribor is an indication of stress in the financial system. Very clearly, things haven't been sorted out and the U.S. subprime story continues to reverberate throughout the market.'' Today's increase pushed the difference, or spread, between the three-month euro money-market rate and the European Central Bank's benchmark rate to 50 basis points, compared with an average of 25 basis points in the first half of 2007.

Faltering credit markets have tipped over into a new and more dangerous phase – and everyone from municipalities trying to get sewers fixed to people shopping for a car loan will pay the price.Yesterday, Alabama's most populous county teetered on the verge what could become the United States' largest municipal bankruptcy. A pair of financial companies said they received default notices from banks nervously looking for loan payments. Reports swirled that Europe's biggest bank unloaded $24 billion (U.S.) of opaque mortgage securities in a fire sale.Those on the front lines – from bond traders to investment managers – say the latest batch of bad news indicates a harrowing new time in the credit crisis. And that could send a shock wave through the U.S. economy as consumers feel their own version of the pain.
"We are in historic scarier-than-all-hell territory," said T.J. Marta, an analyst who monitors the fixed-income markets for RBC Capital Markets. "I am hearing many people say that the market is more broken now than it ever has been.''
Problems are popping up on multiple fronts and all have different implications.
Alabama's Jefferson County is considering a bankruptcy filing to resolve a financial crisis surrounding $3.2 billion of sewer debt. The county is in talks with banks to work out a solution to its liquidity crisis.
Meanwhile, the insurance cities were able to purchase to protect their bonds is losing its lustre. Ratings agencies worry a rise in defaults on bonds backed by riskier debt would cost bond insurers so much they would no longer be worthy of their highest ratings. Those pristine ratings are essential to keep bond insurers in business."The problem now with insurance products is their value is only as good as the perceived view on the insurer," said Richard Tortora, president of Capital Markets Advisors, which provides bond advisory services. Those negative perceptions could last for years, he said.It demonstrates that credit markets are facing a new round of tightening, hitting parts of the market deemed relatively safe months ago.
Many of the largest investment banks are due to report results in two weeks, amid fears of a new round of massive writedowns.
Paul Lueken, president of 1st Advantage Mortgage in Lombard, Ill, said mortgage loan costs are rising as conditions worsen.In the past few weeks, the "spread" of a home loan's interest rate over the interest rate on a Treasury bond – a key measure of the cost of a mortgage – has spiked to a 25-year high.

The U.K, usually 18 months ahead of the U.S. in its credit cycle, is perhaps a harbinger of things to come in the U.S. credit picture.Fears are now rising that U.S. consumer credit cardproblems could ripple out into the global credit market, starting in Europe.Think the estimated subprime debt load carried by the big international banks is big, at $1 trillion?How about this: Americans now owe nearly as much record $915 billion – on their credit cards alone.
And defaults and delinquencies in the credit card sector are piling up – which means big banks are on the hook, again. More sand in the gears for the globaleconomy.
Credit card companies wrote off 4.58 percent in payments between January and May, almost a third morethan in the same period in 2006, according to Moody's Investors Service. As a result, lenders such asCitigroup, Bank of America, and American Express,among others already reeling from the subprimemortgage disaster, are being further weakened.Not to mention the staggering U.S. economy, which is
so dependent on a vigorous consumer credit sector tokeep it healthy. Seventy-two percent of the U.S.economy rides on consumption alone.Third quarter numbers for banks were the worst since2001. First Citigroup took a 57 percent hit in
earnings. The decline was attributed, in large part,to consumer-credit problems. Anticipating additional defaults, they stashed away $2.24 billion in loan-loss
reserves.Other major banks also took a beating and are also
preparing for the expected credit card delinquencies
and defaults.American Express added 44 percent to its U.S. card division loss reserves. Bank of America, Capital Oneand Washington Mutual are all expecting at leastanother 20 percent in credit card losses over the next two to four quarters.
An increase in credit card balances and first-time cash advances were cited by Citi Chief Financial Officer Gary Crittenden as indicators of possibletrouble to come. The change in loan losses was"inherent in the [Citigroup] portfolio but not yet
visible in delinquencies," Crittenden told Fortune magazine.An increase in bankruptcies is a major contributor to card defaults, according to Jay Eisbruck,
managing director of Moody's Asset-Backed Finance
Group.Falling home prices and rising gasoline costs also add to bankruptcy woes.U.S. home prices fell 3.2 percent in the second quarter, the sharpest decline since 1987, according to Standard & Poor's.As home prices fall, homeowners have a harder time
getting cash by refinancing high-rate mortgages. Thehigh cost of gas, often purchased with credit cards,doesn't help either.On Monday, the national average price for a gallon of regular gasoline was $2.971, according to the U.S.Energy Department, up 10 cents from last week, and the highest since the peak summer travel period of August.A three-buck a gallon average is inevitable, say
analysts.Low- and middle-income workers who must drive to work have been hardest hit by the increases, further boosting delinquencies and defaults.Fears are now rising that U.S. consumer credit card problems could ripple out into the global credit
market, starting in Europe. Deutsche Bank, forexample, is now "…in a heightened state of alert tomonitor a potential domino effect," says the bank'sU.S. analyst, Michael Mayo.In the U.K., homeowners are reportedly using their credit cards for mortgage payments. Credit card interest typically runs much higher than mortgage
rates, so reducing one debt by increasing another at ahigher rate can be the first step on the road to default and eventual bankruptcy.

Five former insurance company executives were convicted today in Hartford, Conn., for deceiving American International Group investors back in 2000,
Four led General Reinsurance Corp. — including ex-CEO Ronald Ferguson and ex-CFO Elizabeth Monrad — and one worked at AIG. A federal jury found all five guilty of fraud for a bogus stock transaction that helped AIG add $500 million in phony loss reserves, a key indicator of an insurer's health."This case is about truth, a choice to lie and deception to cover it up,'' Assistant U.S. Attorney Raymond Patricco told jurors in closing arguments. "These five defendants made the choice to lie to AIG's investors and to deprive them of the opportunity to make informed decisions about their stock.'' (Here's the Justice Department's press release.) All could be sentenced to a maximum of 20 years, though sentencing guidelines typically call for lesser terms. They'll learn their fates May 15. The convictions add to the swelling list of big corporate crimes the past few years. The greatest hits include:Days Inn — $100 million bank fraud; PinnFund — $187 million mortgage Ponzi scheme; Brocade Communications — millions in stock back-dating; Enterasys Networks — $97 million accounting fraud; Suprema Specialties — $400 million bank and stock fraud; Tyco — $580 million in theft and stock fraud; WorldCom — $11 billion accounting fraud; Adelphia Communications — $100 million theft and $2.3 billion debt deception; Rite Aid — $1.6 billion accounting fraud; and perhaps the best known case, Enron, which also snared executives from Merrill Lynch.
The Bush administration launched the Corporate Fraud Task Force in 2002 in the wake of Enron and WorldCom. Back in November, the Wall Street Journal's Law Blog flagged an American Lawyer analysis of the task force's accomplishments, which asked: "Is there no more corporate crime — or has the Justice Department simply stopped looking for it?"

A massive tax evasion scandal in Germany has spilled over to other parts of Europe as Berlin vowed to share information on alleged tax evasion centering on Liechtenstein with countries whose nationals may be implicated.Widening the scope of what is already a massive scandal involving hundreds of wealthy German tax cheats sheltering millions in discreet bank accounts in Liechtenstein, the German government said on Monday, Feb. 25, it would provide information to foreign countries whose nationals are involved in the tax evasion affair. "We are going to respond to requests in this regard," German finance ministry spokesman, Thorsten Albig told reporters, adding that Germany would not charge foreign governments for the information. Scandinavians, Britons involved in tax affair? Germany's intelligence service is reported to have paid 4.2 million euros ($6.22 million) to an informant, a former employee of Liechtenstein banking group LGT, for an incriminating list containing the names of hundreds of people who evaded taxes by parking their money in secret bank accounts in the tiny Alpine principality of Liechtenstein. Albig said Berlin bought the information because investigators believed that "it could lead to the return of hundreds of thousands of dollars." Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: It's not just Liechtenstein's scenic beauty that attracts the rich and famous
The list is believed to contain the names of more than 700 wealthy Germans as well as well-heeled tax cheats from other nations. The disclosure has prompted a massive investigation in Germany and frayed ties between Berlin and Liechtenstein capital, Vaduz. Germany's Handelsblatt business daily reported that Finland, Sweden and Norway had signaled interest in getting their hands on the list of bank clients.
Joining the German crackdown on tax evaders, the British government's tax agency said on Monday it too had paid for information on secret Liechtenstein bank accounts held by British citizens. Media reports said Britain paid a whistleblower 100,000 pounds (132,931 euros, $196,000) for details of Liechtenstein accounts held by 100 wealthy Britons. Unpaid taxes in the affair could amount to as much as 100 million pounds, reports said. The Financial Times reported that Britain had refused two years ago to pay the whistleblower but changed its mind after Germany shelled out money to get similar information. The tax scandal also made waves across the Atlantic as a senior US lawmaker said last week he would launch an investigation into American citizens also believed to have hid assets at LGT. High-profile victim The investigation into the tax evasion scandal, considered one of the biggest in German history, began earlier this month with raids on the home and offices of Klaus Zumwinkel, the high-profile boss of Deutsche Post, Europe's largest postal service, who is suspected of having dodged taxes to the tune of 1 million euros. Zumwinkel has since resigned his post. Bildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Zumwinkel's fall from grace was rapid
Ever since, German authorities have been conducting raids across the country on private individuals for allegedly hiding money in accounts Liechtenstein's biggest private bank, the LGT Group, which specializes in setting up foundations and is owned by Liechtenstein's royal family. The affair has angered ordinary Germans and sparked a heated debate about the ethics and accountability of the country's highly-paid business elite. Anger over "stolen information" Equally, the German government's payment for the incriminating information, which was allegedly stolen from the Liechtenstein bank by the former LGT employee, has come under intense scrutiny.
On Monday, the LGT Bank voiced anger at how the "stolen information" was being shared around European capitals. "Apparently, the stolen data material has also been illegally disclosed, directly or indirectly, to other authorities," the bank said in a statement. "LGT regards such methods as being extremely offensive."
The affair has also raised questions about banking secrecy laws enjoyed by some European nations. Liechtenstein is one of only three countries on the OECD's tax-haven black-list, alongside Andorra and Monaco. Germany has vowed to broaden efforts to crack down on tax evasion to countries such as Switzerland, Luxembourg and Austria as well.
Switzerland and Luxembourg have distanced themselves from the charges. Both of the countries prohibit revealing bank information to the outside world except in criminal matters.

hyper-complex credit bubble affecting a dizzying array of little-known but somehow completely intertwined components. No wonder the coverage has been as inconsistent and spotty as, well, the auction-rate market.The auction-rate market? What's that?
Really, how many financial journalists knew what the auction-rate market was-or that it even existed-until a few weeks ago? Or a SIV, for that matter? Or a conduit? Or a credit-default swap? Or even bond insurance? This is normally dense, difficult, unglamourous stuff. So we're left with a, well, strange situation. Thanks to the blogosphere, never before has so much media pantingly followed finance. But never before has the media produced so little real information on such a big event. Ask yourself: has any one outlet, online or otherwise, emerged as the go-to source for original insight into our current situation?To be sure, The Wall Street Journal, The New York Times and the Financial Times have dutifully covered many of the individual shoes that have dropped as we fall deeper into an economic quagmire. And in the blogosphere, Portfolio.com's Felix Salmon, for one, has done a decent job providing running commentary on developments and directing his readers to other outlets when they turn up something interesting. But no one seems to be putting it together into a coherent package or explaining how these complex markets and products fit together and why anyone should care about them. Instead, we get general rehashings like Mort Zuckerman's elementary explainer in the Feb. 27 issue of The New Republic. Its headline: "Panic!"
A Subprime-Induced Crisis, that spread from the mortgage companies to the largest hedge funds, to the biggest banks…and finally to the plummeting stock markets.
A Powerless, Reckless Fed: The Bernanke "Plunge Protection Team" recklessly cut rates as quickly as possible to fight off a possible recession.
A Worldwide Credit Orgy: The ECB pumped an astonishing one-half trillion dollars into the global financial system in late December to help alleviate the credit crunch in a single week.
An Epidemic of Writedowns: Wall Street's biggest financial firms wrote-down tens of BILLIONS to keep their books in the black.
Biggest Banks Crying "Uncle!" Sovereign Wealth Funds (SWFs) from Singapore and China road to the rescue to bailout "too-big-to-fall" banks like UBS and Citigroup. And just yesterday, Qatar officials announced they would pump as much as $15 billion of their Sovereign Wealth Funds to buy distressed European and U.S. bank stocks over the next 12 months.
Global Stocks Head One Way — Down: Not to mention, the Dow dropped over 11% since just November 1st. And, we just had the worst January for stocks since 1990.

Last year, three Italian nationals, including a civil servant working for the European Commission were charged with forgery, corruption fraud and forming a criminal organization.
In what could become a major corruption scandal in the European Union, a confidential report by the European Parliament's internal auditors says that some of the 784 members of parliament (MEPs) were employing family members while others had registered payments to firms which did not exist.
The demand for an investigation was made by Charles Davies, a member of the UK Liberal Democrat party and the parliament's budget control committee. Davies, who was among a handful of MEPs allowed to see the report, perused its contents under supervision and was forbidden from taking notes or making photocopies.Corruption cases at EU institutions are a sensitive issueThe EU's anti-fraud unit, OLAF, which routinely checks internal audits made by the EU's various institutions, will now scrutinize the secret internal study to determine whether there was an abuse of public EU funds.Complied by the EU parliament's internal auditor, the report analyses 167 payments made in 2004 and 2005 to MEPS' assistants.
Each member of the European Parliament is granted 16,000 euros ($23,500) a month to pay assistants. While some assistants work in Brussels, other staffers work in their MEP's own country. Parliamentarians pay their staff 140 million euros a year, about 10 percent of the assembly's overall expenditure.News agency AFP quoted an unnamed EU deputy who said, "The auditor found proof that in some cases the listed service provider didn't even exist." Citing another unnamed parliamentary insider, the news agency said the abuses amounted to almost 100 million euros.Davies told EUobserver that his first reaction was "a degree of hysteria given the scale of the abuse that is taking place and given the fact that it has been kept secret."How transparent is the European Parliament?Davies, who contacted OLAF about the report, called the decision to keep the report secret "absurd" and a "travesty of justice."
"A parliament committed to openness and transparency has no right to try and keep secret details about how public money is used and misused. And… we are talking about very large sums of money," Davies said.
Though the EU Parliament has not commented on the details of the report, spokeswoman Marjory van den Broeke said the audit confirmed that the remuneration system was "too complicated" and had become "very difficult to manage, both for the deputies and for the parliament's administration."

The European Parliament's secretary-general is now to propose a simpler system for hiring and administering staff, doing away with the current system which involves at least three different methods for MEPs to put together their team of assistants.
Corruption cases at EU institutions are a sensitive issue after a scandal in the late 1990s brought down the entire European Commission.
The commission and an assistant to an MEP were charged with forgery.
Edith Cresson, a former French Prime Minister who served as research and education commissioner in Brussels from 1995 to 1999, was accused of hiring a dentist from her home town as an advisor, despite being warned it was against EU rules.
The scandal eventually led to the collective resignation of the commission and its President at the time, Jacques Santer, in March 1999.

``The market is full of rumors of unwinding of CDOs, and the price action suggests that people believe the rumors,'' said Peter Duenas-Brckovitch, head of European credit trading at Lehman Brothers Holdings Inc. in London. ``It sort of has that Armageddon feel, and the market is feeding on itself.'' Everyone knows that homeowners insurance is designed to insure against fires and floods but few are familiar with credit default swaps, arcane financial instruments invented by Wall Street about ten years ago. Credit default swaps (CDS) were designed as “insurance” to reimburse banks and bondholders when companies failed to pay their debts. Credit default swaps have become so popular among banks that the Comptroller of the Currency (OCC), which regulates banks, reports that they are the fastest growing derivatives product in the market, growing 19% from the second quarter to the third quarter last year to $14 trillion in value. The problem is, they are unregulated. Experts contend that, because credit default swaps have proliferated so rapidly, a hiccup in this market could set off a chain reaction of losses in financial institutions that will virtually dry up the banks' ability to lend. The cost of protecting corporate bonds from default soared to a record as investors purchased credit-default swaps to hedge against mounting losses in the $2 trillion market for collateralized debt obligations. This is more than just a tempest in a teapot. Already AIG , the largest insurer in the United States , has had to deal with pricing and risk issues with its independent auditors on some of the credit default swaps it holds. Societe Generale, the French bank that recently reported losses from a rogue trader, also has problems with CDSs. "The purchase of assets originating from asset-management funds invested in credit-type underlyings could continue in the first quarter and, given the situation in the credit markets, lead to further write-downs," the bank warned. Credit Suisse was forced to raise the coupon on a $2 billion note it was offering after reporting writedowns of $1 billion in the first quarter of 2008 dealing with credit-default swaps. All of this must be leading to arguments between the boards of directors and their independent auditors at almost every major bank about the true value and risk of their credit-default swaps. The trouble is, they must have their 2008 reports signed off by their auditors and in the hands of the Comptroller of the Currency by February 28th , for the OCC's year-end report. The problem is, practically no one can get a handle on the true value of their credit-default swaps because they are thinly traded, have huge counter-party risk, are unregulated and are difficult to analyze.

Fairfax Financial Holdings Ltd., which has just cashed in on a huge bet against the U.S. bond market, has laid down a wager that the credit crunch will hit Europe with a similar force. The insurance firm yesterday revealed a 2007 profit of $1.1-billion (U.S.), more than quadruple the previous year's results, thanks to its investment in credit default swaps (CDS), which rise in value when market conditions deteriorate. Fourth-quarter profit more than tripled to $564-million. But Fairfax chairman and chief executive officer Prem Watsa is also setting his sights across the Atlantic. Fairfax has invested about $60-million in European CDS in the belief that the lending problems that have struck UBS AG, Credit Suisse Group and other financial institutions may grow more serious."[The losses] are slowly starting to hit the marketplace," Mr. Watsa said.
Fairfax's 2007 results were driven by $705-million in investment gains in the fourth quarter from CDS, including those tied to distressed monoline insurers. CDS are similar to an insurance policy against a default on bonds or loans. A buyer such as Fairfax pays a small premium and stands to gain if the borrower defaults, or if the perceived risk of a default grows higher.Before last summer, credit default swaps were inexpensive. In the case of monoline insurance companies, which have run into trouble for backing collateralized debt obligations with too many risky loans in them, an investor could buy swaps for between 1 and 2 per cent - in other words, paying $1-million to $2-million for $100-million worth of credit protection. Today, that same insurance can cost $25-million or more, as the market worries that companies like Ambac Financial Group Inc. and MBIA Inc. will not be able to handle their massive debts.Mr. Watsa said credit risk in the monolines is now "much closer to being fairly priced," so Fairfax sold virtually all of those swaps in January and early February. As of Feb. 15, it still owned credit default swaps worth nearly $1.3-billion.But he said many other assets - including stocks - are still too expensive, particularly if the U.S. has a deep recession.
Fairfax's results were also boosted by a strong year in insurance underwriting. The company paid just 94 cents in claims and expenses for every dollar in premiums it received. Analyst Jeff Fenwick of Cormark Securities Inc. said Fairfax's operating fundamentals in the insurance business are strong, even without the CDS gains.
The fact that Fairfax has cashed in some of its CDS gains - leaving it at year-end with almost $1-billion of cash - means the company is in a strong financial position for 2008, he said.
The shift into European CDS also looks like a good bet, Mr. Fenwick said, because "we've seen the contagion from what's gone on in the U.S. markets spreading around the world."Fairfax stock has moved up sharply recently, rising from about $200 six months ago to more than $300.

Tax evasion has become something of a national pastime in major Western countries, thanks to symbiotic cooperation between legislators and lobbyists. Governments are realizing that there are trillions of dollars percolating around Lichtenstein, Luxembourg, the Cayman Islands, the Bahamas, the Virgin Islands, Jersey, Mauritius, Switzerland, Cyprus, etc.However, the “war on tax evasion” is as stupid as the “war on drugs.” Tax havens have a supply and demand function just like any other product. Intelligent people with capital will always create new havens to the extent that they need them.Getting to the main point: Lichtenstein has found itself dead in the middle of the scope of the German BND intelligence agency, which blatantly violated its extraterritorial mandate to hound the assets of wealthy Germans, by literally infiltrating a Lichtenstein bank and bribing an employee to leak data. Apparently a bunch of Americans’ and other non-Germans’ information was also leaked.