On the Global Financial Crisis…

Over the course of the previous decade, the press regarding various instances of financial mismanagement, fraudulent activity and underhanded collusion by too-big-to-fail-or-prosecute banks and investment firms has become increasingly frequent. For the financial services sector entrusted most simply with keeping funds safely where they’re deposited and not starting financial depressions, this has apparently proven to be the most challenging task in both the US and EU with Australia fairing marginally better but not without incident. Compounding these systemic failures to the severe detriment of the majority of people is the inability of the courts or governments to prosecute those personally responsible for the Global Financial Crisis (GFC) – which hence relegates the importance of the laws intended to protect the very same people they’re being used against and almost condones such behaviour by financial institutions such as Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland.

Entire US states have been forced to declare bankruptcy, European nations have enacted increasingly harsh austerity measures, the Australian Securities and Investments Commission allowed months to pass before investigating allegations regarding the Commonwealth Bank of Australia (CBA) – with the most dire of consequences affecting those most powerless to stop them. Before we got lost in latent anger and fury however, here’s a look at the facts and figures as simply as they can be stated in their simplest form.

  • Dec 1997 – AUS – ‘CBA employee Don Nguyen writes $39m of new business in 10 months, 3.5 times his target’ 1
  • Nov 1998 – US – “Glass-Steagall legislation (‘a law passed after the Great Depression, which prevented banks with consumer deposits from engaging in risky investment banking activities’2) repealed. This allowed Federal Deposit Insurance Corporation (FDIC) insured banks, whose deposits were guaranteed by the government, to engage in highly risky business. It also allowed the banks to bulk up, becoming bigger, more complex and unwieldy.” 3
  • Dec 2003 – US – Freddie Mac fined $125 million, Fannie Mae fined $400 million to settle federal regulator’s allegations of mismanagement at the mortgage finance giant that is blamed for a $5 billion understatement of earnings. 4
  • Apr 2004 – US – “The Securities and Exchange Commission changed the leverage rules for just five Wall Street banks… The “Bear Stearns exemption” replaced the 1977 net capitalisation rule’s 12-to-1 leverage limit. In its place, it allowed unlimited leverage for Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns. These banks ramped leverage to 20-, 30-, even 40-to-1.” 5
  • Apr 2006 – US – ‘Mortgage giant Freddie Mac has agreed to pay a $3.8 million Federal Election Commission fine — the agency’s largest ever — to settle charges that it illegally raised campaign money for members of Congress.’ 6
  • 2007 – US – Collateralised debt obligations (CDO) market stands at $4 trillion and this compares with a 1998 figure of $350 million. 7
  • Sept 2007 – US – ‘Freddie Mac, the nation’s second-largest financier of home mortgages, is paying a $50 million fine to settle civil securities fraud charges brought by federal regulators in a four-year accounting lapse.’ 8

We take these charges seriously, and that’s why the Freddie Mac of today is a very different company than the Freddie Mac of the past.

– Richard Syron, Freddie Mac’s chairman and chief executive officer – 28/9/2007

  • Sep 2008 – US – the bankruptcy of the U.S. investment bank Lehman Brothers, and the collapse of the world’s largest insurance company, AIG, triggered a global financial crisis. 9
  • Oct 2008 – AUS – Whistleblowers tip off ASIC (Australian Securities and Investments Commission) to Don Nguyen’s fraudulent activity. 10
  • Jan 2009 – UK – British bank Lloyds-TSB paid a fine of $350m to US authorities after prosecutors accused it of faking records so clients in Iran, Libya and Sudan could do business with US institutions. 11
  • June 2009 – AUS – Whistleblowers tip off CBA to Don Nguyen’s fraudulent activity. 12
  • Feb 2010 – AUS – Whistleblowers visit ASIC head office in Sydney to demand action. 13
  • Dec 2009 – US – Swiss banking group Credit Suisse says it will pay $536m for violating US sanctions against Iran. 14
  • March 2012 – US – Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine… Yet the total fine was less than 2% of the bank’s $12.3bn profit for 2009.’ 15
  • March 2011 – AUS – Nguyen banned for seven years. 16
  • Nov 2011 – US – RBS fined $52 million, Goldman Sachs fined $60 million, Morgan Stanley fined $102 million in order to settle charges filed by the state of Massachusetts that unfair residential mortgages were put into investment pools. 17
  • June 2012 – UK – Barclays fined £290m for its “serious, widespread” role in trying to manipulate the price of crucial interest rates that affect the cost of borrowing for millions of customers around the world. 18
  • Oct 2012 – US – ‘Royal Bank of Scotland has been fined £26million in the US for selling thousands of home loans which helped trigger the global financial crisis.’ 19
  • Nov 2012 – AUS – ‘Another CBA planner Ricky Gillespie permanently banned after forging client signatures. Seven planners now banned’. 20
  • Dec 2012 – US – British-based bank HSBC fined $1.9 billion (or about five weeks’ profit) for the largest drug-and-terrorism money-laundering case ever. Not one dollar or one day in jail from any individual, despite a decade of stupefying abuses. 21
  • June 2013 – US – ‘Former Freddie Mac CEO Richard Syron and other executives serving during his tenure failed to escape a pending case filed by the Securities and Exchange Commission over subprime mortgages….The SEC claims the former executives misled investors about the company’s subprime mortgage exposures between the dates of March 23, 2007 and Aug. 6, 2008.’ 22
  • June 2013 – US – ‘Former Goldman Sachs Vice President Fabrice Tourre lost a bid to limit a U.S. Securities and Exchange Commission civil fraud case against him over a transaction that led to a $550 million settlement by the Wall Street bank’. 23

Perhaps the most galling aspect of this unprecedented set of events – as if it weren’t infuriating enough – is that along with the meagre amounts paid by these various institutions in fines, no admission of guilt was necessary. Given that Court hearings on events from the early 2000’s are still currently taking place and media coverage has at times been documenting events years after the fact, it may come as no surprise that a fundamental change in the global economic system could be years, decades or generations away…if ever.

Josh Rayson (KS)

References

1 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

2 http://www.sonyclassics.com/awards-information/insidejob_screenplay.pdf

http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story_1.html

4 http://www.accountingweb.com/topic/freddie-mac-agrees-pay-125-million-fine

5 http://www.washingtonpost.com/business/what-caused-the-financial-crisis-the-big-lie-goes-viral/2011/10/31/gIQAXlSOqM_story_1.html

http://usatoday30.usatoday.com/money/companies/regulation/2006-04-18-freddie-mac_x.htm

7 http://www.europeanbusinessreview.com/?p=436

8 http://usatoday30.usatoday.com/money/economy/2007-09-27-3719577201_x.htm

9 http://www.sonyclassics.com/awards-information/insidejob_screenplay.pdf – Page 7

10 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

11 http://news.bbc.co.uk/2/hi/8417239.stm

12 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

13 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

14 http://news.bbc.co.uk/2/hi/8417239.stm

15 http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

16 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

17 http://www.marketwatch.com/story/rbs-reaches-52-mln-settlement-with-mass-ag-2011-11-28

18 http://www.guardian.co.uk/business/2012/jun/27/barclays-chief-bob-diamond-bonus-fine

19 http://www.thisismoney.co.uk/money/markets/article-2222676/Royal-Bank-Scotland-fined-26m-Nevada-toxic-home-loans-helped-trigger-global-financial-crisis.html

20 http://www.theage.com.au/business/profit-above-all-else-how-cba-lost-savings-and-hid-its-tracks-20130531-2nhde.html

21 http://www.rollingstone.com/politics/news/gangster-bankers-too-big-to-jail-20130214

22 http://www.housingwire.com/news/2013/04/01/former-freddie-mac-executives-fail-escape-subprime-fraud-case

23 http://www.4-traders.com/NATIONAL-AUSTRALIA-BANK-L-6493174/news/Ex-Goldman-VP-Tourre-loses-bid-to-narrow-SEC-fraud-case-17002778/

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KS – Westernstrumentals

I’d like to invite you to enjoy my latest EP (written under the moniker KS) – it’s a smoked out and psychedelically tinged joint of grooves, 1 part social commentary, 2 parts humour and influenced equally by underpaid agitation and late-night relaxation.

Please listen, download, duplicate and de-stress.

Westernstrumentals

Much love and many thanks

KS – DUES

Leeds via Europe

the oddities of Leeds…

I’ve seen the sun remarkably rarely….in fact, I’ve seen more ice-cream trucks than more sun rays over the last 4 months…and ads for sunscreen! HA!

Learning the fine art of banter and taking the piss has led to feeling as though I’ve learnt a new language. That being said, it’s nothing in comparison to Oscar Wilde. His writing takes the piss.

I’ve been hard at work…a little. I’ve been reluctant to constantly write updates. does more webspace need to be taken up by a tumblr?  self censorship is important, as is internalising experiences rather than publicising them.

A freshly pressed EP shall be ready to purchase too if you’re at all interested…very soon.

Goodnight Leeds, Good Morning Melbourne.

PS. If there’s a picket fence at uni tomorrow on account of the strikes, I will not be a scab. Picketing sounds a little like loitering, but with more badges, signs and oppression. If there’s nothing I love more than a double espresso in the morning, it’s indiscriminately hanging around while drinking one. I have a permanent marker and books and books of unused paper (They’ll come in handy though Mum).

I’ll say

Assessment 3

The premise of this post is to provide an answer to these simple questions…

How do I earn a living in the arts sector?

How do I promote my career?

Probably best to cut the preamble and face the complexity inherent in answering life pursuits.

In order to earn a living in the music industry, one must either sell their soul/creative freedom/life to a record label – usually one of the majors, but also possibly to an independent label, ironically enough. I used to be under the apparently false impression that ALL indie labels would allow artistic merit to blossom and fully support their artists, but it comes as no surprise to find that creative accounting is the only encouraged art-form.

“My favorite retarded trick is he would make the numeral and literal amounts of the check different, so our bank couldn’t cash it,” says Albini. “It was like dealing with a small child who’s trying to hide cookies under his pillow. I’m sure it did earn him a small aggregate profit, being so duplicitous about everything. But it seems like so much work to be that devious about small amounts of money.”

Steve Albini, Magnet, 2006. On notorious indie imprint (and one of Sonic Youth’s first labels) Homestead Records, run by Wharton Business School grad Barry Tenenbaum.

Of course, major labels have earned their reputation for a reason as well…

“This is how screwed up the music business is in the early twenty-first century: Last summer, after completing their fourth and best studio album, Yankee Hotel Foxtrot, alternative-country idols Wilco delivered the record to their label, Reprise. The company reacted as if the music was caked in anthrax, throwing the album back at Wilco and arranging for them to leave the label — immediately. Yankee Hotel Foxtrot now arrives in stores, intact, on Nonesuch. Like Reprise, Nonesuch is a subsidiary of AOL Time Warner. Essentially, the mother firm paid for the album twice. I would love to see one of the suits explain that to the shareholders.”

DAVID FRICKE
(RS 895 – May 9, 2002)

Yankee Hotel Foxtrot sold over 500,000 copies sold in the U.S. and topped the Pazz and Jop critics’ poll for 2002.

So the old adage is true – hard work and confidence in ability ie. playing shows and practice – is probably the only way to ensure a sustainable living in the music industry. Numerous artists have released a first album that sold reasonably well, gained commercial attention and either appeared on commercials in order to retain interest from the unwitting public or played every show they could, partying and then when it came to writing good music again, the magic was gone.

Some examples include (and might I add, I never liked these artists to begin with):

Julian Lennon

Oasis

The Knack

Kaiser Chiefs

As for promoting a career in a unique and interesting way AND making money? Look no further than Radiohead and Nine Inch Nails, who gave the fans to choice to pay what they like or pay more money for more product. Of course, few other bands around today could do this and make profit, case in point…

“After producing Saul Williams’ The Inevitable Rise and Liberation of Niggy Tardust and offering it to fans online, Reznor yesterday laid out the numbers from his experiment. Saying that it’s easy for artists to know “what NOT to do these days, but less obvious to know what’s right,” Reznor found that 18.3 percent of users who grabbed the album paid $5 for it; the rest paid nothing.”

By Nate Anderson | Last updated January 4, 2008 10:42 AM

This essentially sums up the dilemma for musicians in today’s musical and financial climate – however, as mentioned before, hard work still pays off. Bands play shows for a reason (and they can actually make money from them too) because that’s how artists have to exist today. No longer can an artist rely on a product, lest they start their own label and put in a great amount of effort, or sign to an honest independent.

Labels who succeeded:
SST (started by Black Flag)
Dischord (Minor Threat)
Matador
Kranky

So, in answer to the questions, all that’s needed is dedication and years of work.

With all that said, here’s My Band.

s 3822382

References

http://pitchfork.com/features/articles/7871-bad-moon-rising-the-practical-lessons-of-sonic-youth/
http://arstechnica.com/old/content/2008/01/gettin-niggy-with-it-reznor-releases-numbers-for-online-experiment.ars
http://arstechnica.com/old/content/2008/03/reznor-makes-750000-even-when-the-music-is-free.ars