Opinion

Ben Walsh

from Counterparties:

Standard incompetence

Ben Walsh
Aug 20, 2014 21:05 UTC

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Standard Chartered’s compliance department is apparently pretty bad at complying. In 2012, the bank was fined $340 million for hiding transactions with sanctioned Iran. As part of the settlement, Standard Chartered bank (SCB) was required to “remediate anti-money-laundering compliance problems,” Dealbook’s Ben Protess and Chad Bray report, and hire an outside monitor to judge whether the problems were in fact remediated.

They weren’t, and the bank will pay $300 million for “anti-money laundering failings in its United Arabs Emirates and Hong Kong businesses,” Reuters Michelle Price reports. The failures, laid out in a settlement with the New York Department of Financial Services, display an almost comical or willful ineptitude, depending on your perspective. SCB, the settlement says, “created a rulebook with procedures to aid it in detecting high-risk transactions.” But the rulebook was filled with errors that SCB didn’t know about, because it didn’t try to find out if the rulebook was adequate before or after it wrote it. This allowed transactions that should have been closely scrutinized to sail through unimpeded. To top it all off, SCB didn’t properly monitor its own transaction monitoring system. You can see why an independent monitor would be necessary.

As part of its settlement, the bank will also suspend clearing payments in dollars for certain clients, and take even more remedial measures. One of those is extending for two more years the term of Navigant, the independent monitor that caught the latest slip up.

Matt Levine wonders why, given how bad SCB seems to be at understanding and preventing money-laundering, the monitor should content itself with just reporting SCB’s problems: “If the monitor knows so much about anti-money-laundering procedures, shouldn't it have just designed the procedures? Isn't the goal to have less money laundering?”

The bank’s management isn’t taking the fall. CEO Peter Sands, Protess and Brayreport, says he has “no other plans” than to remain in his position. Earnings per shareare down, though, and the board is under pressure to make a change. If Sands is ousted, it wouldn’t be the first time a board used scandal as a pretext for a financially-motivated decision.  — Ben Walsh

from Counterparties:

Putting stock in the market

Ben Walsh
Aug 18, 2014 21:11 UTC

Robert Shiller wants us to talk about stock prices. “We are in an unusual period, and that it’s time to ask some serious questions about it,” he says.  Specifically, Shiller wants to discuss just how far above normal they currently are:

The CAPE [cyclically adjusted price-earnings ] ratio, a stock-price measure I helped develop — is hovering at a worrisome level... It is above 25, a level that has been surpassed since 1881 in only three previous periods: the years clustered around 1929, 1999 and 2007. Major market drops followed those peaks.

That measure of stock price valuation has, Shiller writes, moved all over the place, “yet it has consistently reverted to its historical mean” of just over 15. (If you prefer purely anecdotal signs of effervescence, those exist too. Actor Jared Leto has become aventure capitalist and NBA All Star Carmelo Anthony is becoming a tech investor.) Shiller tries, but can’t quite come up with a good, fundamental reason why the market should be so elevated.

from Counterparties:

Hungry, heavy and poor in America

Ben Walsh
Aug 12, 2014 22:30 UTC

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America’s hungriest region is also its heaviest,  Eli Saslow reported as part of his Pulitzer Prize-winning investigation. Saslow documented the perverse coincidence of hunger, obesity, and poverty in Texas’ Rio Grande Valley. In one county in the region, 32 percent of the residents are obese and 40 percent have been severely hungry in the last month. The problem is complex, but the crux of it comes down to trying to feed families on minuscule budgets and limited aid. “It is unrealistic to expect someone stretching their dollars to be highly worried and focused on nutritional content,” Saslow quotes a food policy analyst saying. “They just need to eat.”

Talk of “food deserts” is trendy – witness former sexting Congressman Anthony Weiner’s latest redemption effort –  but it’s probably not as big of a problem as it seems, James McWilliams writes in the Pacific Standard. McWilliams says there have been cracks in the thesis that a lack of access to healthy food causes obesity since at least 2012. But now, the evidence is fulsome and convincing. Food deserts aren’t the problem – poverty is.

Bad nutrition and obesity are, of course, not phenomena confined to the poor, even though the poor are disproportionately affected by them. Everyone gets bombarded with things – from labels to menus to ads – that fool us into eating terribly. But the poor, McWilliams point out, “live lives defined by persistent scarcity—not necessarily food scarcity, but a generalized and even traumatizing kind of material instability. Absolutely nothing about their lives is secure.”

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