Article: UBS Risk Management Fiasco Illustrates Hidden Big Bank IT Time Bombs

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UBS Risk Management Fiasco Illustrates Hidden Big Bank IT Time Bombs

Yves Smith

Naked Capitalism, 11 January 2013

One of the sources of risk in big and even moderately big banks that does not get the attention it deserves is information systems. Having mission critical systems function smoothly, or at least adequately, is crucial to a major trading operation. Huge volumes of transactions flow through these firms, and the various levels of reporting (customer exposures, funds flows, risk levels, transaction and reconciliation failures) need to be highly reliable or things get ugly fast. Witness MF Global, where the firm was unable to cope with the transaction volume of its final days and literally did not know where money was at various points in time during the day.

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Article: Anger at Goldman Still Simmers

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Anger at Goldman Still Simmers

Gretchen Morgenson

New York Times cited by RGM Communications via Wayback, 26 March 2012

Just before the financial crisis began in September 2008, a prominent hedge fund appeared well positioned to take advantage of any turmoil in the markets. That fund, Copper River Partners, had made sizable bets months earlier against companies whose stocks it expected to suffer.

Within weeks, however, Copper River, once a successful $1.5 billion hedge fund, was out of business, having unexpectedly absorbed losses on the very bets it thought would be profitable.

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Article: Field of Schemes: David Einhorn’s latest short

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Field of Schemes: David Einhorn’s latest short

Richard Smith

NakedCapitalism, 15 October 2010

Einhorn is the famous Lehman short of 2008; he got a lot of flak from Clueless Charlie Gasparino for that. I seem to remember our own Lehman bear, Yves, getting snarled at by Charlie G somewhere along the line, too. But of course, Einhorn, via his vehicle Greenlight Capital, had it right; as did Yves (something that those decrying the “Yellow Journalism” of recent NC posts on “foreclosuregate” would do well to consider).

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Article: Cox’s SEC Censors Report on Bear Stearns Collapse

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Cox’s SEC Censors Report on Bear Stearns Collapse

Mark Pittman, Elliot Blair Smith, Jesse Westbrook

Bloomberg cited by RGM Communications via Wayback, 7 October 2008

U.S. Securities and Exchange Commission Chairman Christopher Cox’s regulators stood by as shrinking capital ratios and growing subprime holdings led to the collapse of Bear Stearns Cos., according to an unedited version of a study by the agency’s inspector general.

The report, by Inspector General H. David Kotz, was requested by Senator Charles Grassley to examine the role of regulators prior to the firm’s collapse in March. Before it was released to the public on Sept. 26, Kotz deleted 136 references, many detailing SEC memos, meetings or comments, at the request of the agency’s Division of Trading and Markets that oversees investment banks.

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Web: The Geese Are Beginning to Be Slaughtered


The Geese Are Beginning to Be Slaughtered

Bud Burrell, Chris Clair

HedgeWorld cited by Sanity Check via Wayback, 12 April 2006

U.S. defined benefit pension plans have been upping their allocations to alternative investments, including hedge funds, in recent years, helping boost hedge fund assets to above the $1 trillion mark.

But defined benefit plans, particularly in the corporate world, are facing big problems. They are almost universally underfunded, they face a future with more retirees than ever thanks to longer life expectancies and younger retirement ages, and those retirees are receiving better benefits than in the past. A number of companies, including IBM Corp., Verizon Communications Inc., Motorola Inc., and Lockheed Martin Corp., have announced they are freezing their defined benefit plans, the first step toward eliminating them altogether.

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Article: SEC’s IPO probe expands to include Morgan Stanley

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SEC’s IPO probe expands to include Morgan Stanley

Investment Executive, 26 February 2003

“The Securities and Exchange Commission, expanding a probe into alleged IPO abuses, has signaled to Morgan Stanley that it may file civil charges alleging the securities firm doled out shares to investors based partly on their commitments to buy additional stock after trading began, people familiar with the matter say,” writes Randall Smith in today’s Wall Street Journal.

“The SEC staff has informally indicated to Morgan Stanley that it plans to send a so-called Wells notice notifying the firm of the planned charges, the people said. The development suggests the SEC’s investigation into such “laddering” of stock sold in initial public offerings could be heating up. The probe is one of the last major regulatory crackdowns on Wall Street excesses that characterized the 1990s stock-market bubble.”

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