If you are into Michael Lewis like books, there is a good book called the Quants that follows the path of 5 people in finance. One of them is Boaz Weinstein who became the youngest director ever at Deutsche and whose group made over billion one year as derivatives traders. The bank has been cleaning up the mess he left ever since.
It failed last years banking stress test in no small part to Deutsche's involvement in the derivatives market. The IMF just named them as the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. So next time someone tells you that american banks are responsible for screwing up the world. Point them at the Germans and the Swiss :)
BlackRock is a provider of financial instruments (such as popular iShares ETFs) http://quicktake.morningstar.com/fundfamily/blackrock/0C0000... and is unlikely to call the shots at Deutsche beyond adhering to its voting guidelines during annual corporate elections.
As I understand it BlackRock signed up to the Stewardship Code - designed to ensure that asset managers take a role in the companies in which they hold significant interests.
Ignoring/avoiding their responsibilities is not ok
No ETF or fund holder votes their proxy. So it falls to the Blackrocks, Vanguards and Fidelitys of the world to hold self-serving corporate boards to account.
So, how do they move the stock? Bags of stock certificates on international flights? It seems that shifting stock between business units might incur taxes or other regulatory concerns.
In all likelihood, they never do. Russia Account buys $10MM of Stock in rubles; England Account sells $10MM of Stock in pounds sterling. Presumably England Account sold short, meaning it pays interest on its borrowed stock. Other than that, there is no carrying cost to maintaining the arrangement. Worst case: you deal with it if you're caught in a short squeeze.
If these securities were bought on different exchanges, e.g. Russia Account bought the Russia-listed stock and England account bought the UK-listed version, they may never be directly reconcilable. One would have to negotiate "special delivery" off exchange with willing counterparties [1].
Otherwise, one could demand stock certificates in Russia, mail them to the UK, and deposit them in England Account to close out the short position. That seems like a lot of trouble to avoid paying short interest. Worst case: after withdrawing funds from England Account let it default on its short obligation if the price goes up, thus leaving Deutsche Bank to sort out the mess of reconciling England Account's loss with Russia Account's offsetting (hopefully) gain.
[1] Actually, doing this on exchange seems sloppy. Sure, you get a bit more liquidity. But that doesn't seem like something you'd be worried about when putting in place a structure you expect to leave be into perpetuity. Doing this in the private, i.e. un-registered securities, markets would leave less of a paper trail and make moving the securities easier.
Equities and other securities are usually held in street name[1], not the current owner's name, and they are not physically moved around, but rather consolidated at clearinghouses.
As far as I understand it it's a little like transferring electronic funds between accounts. The brokerage or exchange is the actual owner of the shares, but moves them electronicly between various accounts. Which leads to some weird voting rules.
This does not seem particularly bad to me, or maybe it is not bad at all: Russia wishes to unfairly restrict the ability of its citizens to do with their money what they please. The state itself is more of a gangster than a state in the European / American sense:
Many businesses in the Russian Federation avoid taxes by using offshore jurisdictions, such as Cyprus, for their headquarters. Rich Russians, meanwhile, often funnel their private fortunes offshore, in an effort to hide their assets from the capricious and predatory Russian state.
Going round Russian restrictions seems if anything to be positive: When the rules themselves are wrong one should not feel bad violating them.
The other day in response to an HN comment I dug up this link: http://www.institutionalinvestor.com/article/3427198/banking.... If I had a large amount of money in Russia I too would be looking for ways to get it places where it is unlikely to be seized. One does not have to closely follow the case of Khodorkovsky, or for that matter Kasparov's advocacy, to be convinced that Russia is an ill place for long-term investments.
>Going round Russian restrictions seems if anything to be positive: When the rules themselves are wrong one should not feel bad violating them.
You can't very well expect Russia to enforce other countries' tax rules if you aid Russian companies and individuals to take their money beyond the reach of the Russian state.
Besides, it's not clear to me the Russians are any worse than the US. If I emmigrate to Switzerland (or wherever) and renounce my US citizenship, the US believes it has the right to take 40% of my assets and tax my Swiss income for the next ten years. That's gangster state BS.
> If I emmigrate to Switzerland (or wherever) and renounce my US citizenship, the US believes it has the right to take 40% of my assets and tax my Swiss income for the next ten years. That's gangster state BS.
I was not aware of that, and given how crazy that sounds I looked it up, and it seems to no longer be true.[0] I still find it crazy that US citizens have to pay taxes when they live abroad.
You don't seem to try to understand the proposition. To feel bad is not at all the same thing as thinking it is illegal. Prisons are an after thought, why would you lead with that?
You suppose a society could function without an intricate understanding of the necessity of ones own actions? That would be the definition of irresponsibility.
I think you may have misread me, otherwise I'm not sure where you're coming from. Isn't it reasonable to conclude that the Russian cash restrictions they mention are laws? The laws they are advocating ignoring in good spirit?
The operative term in their sentence is not "feel bad," it's "violate," and prisons are indeed full of people who do not feel bad about violating laws.
You abstractly argue that bad things follow from bad things. Whether that concretely applies in this specific instance or not is only implied. Of course that leaves a lot of room for interpretation.
Whether the laws in question are just or whether the culprits in Cyprus will be brought to their punishment in prison is open. That's what I mean, you didn't understand.
I gave my only argument, trying to mediate between the two opinions, trying to consolidate them. I hoped that was obvious. I am also torn between these two extremes, and avoided to build a line of arguments.
My point was simply whether a population ignoring laws they don't like qualifies as a functioning society. Prison is simply a logical result of ignoring laws. Whether that actually happens, and whether it happens for the reasons GP outlined, indeed remains to be seen.
> My point was simply whether a population ignoring laws they don't like qualifies as a functioning society
Even if it doesn't the, the implied opposite doesn't logically follow.
Prison is not a good proof of the legality of anything. Prison is terrorism when it is punishment, not mere exclusion from society. And when it is, then the need to exclude is a much more basic principle to argue about. Which the OP hardly did, so why did you try? Taking the bait pretty much. Arguing the law itself would have been on topic.
The definition of a functioning society is far out of scope here, anyhow.
this is probably less to do with avoiding capital restrictions but more money laundering.
as far as i know, that is illegal almost everywhere. it doesn't seem to be a big deal to Russia because
> When Moscow regulators looked into the mirror trades, they found little to trouble them.
but the rest of the world takes a dim view to the kind of crazy activities that seem to happen on a daily basis in Russia. if the internet is to be believed, every single billionaire in there must have made their fortunes from selling nuclear missiles and ISIS oil.
Mostly unrelated, but this reminds me of Norbert's Gambit[0]. (A method for converting USD <-> CAD at market rates using dual-listed stocks. By other methods, Canadians face relatively high add-on fee percentages for USD<->CAD conversions.)
> Choose a reasonably liquid interlisted stock. The large Canadian banks and resource companies are usually good choices. The simultaneous purchase of such a stock in one country and sale of the same stock in the other country will effectively convert one currency to the other at close to the spot rate. The investor's cost is two trading commissions and some bid-ask spread, which is usually much less than the standard 1% (or greater) fee at a bank or broker.
That's interesting. I wonder if any of the commission-free brokers like Robinhood allow one to carry balances in multiple currencies.
How are there no capital gains tax on the sale? Is it moot because you make no / minimal profit?
While this is an interesting article it seems hard to draw a direct connection between the alleged money laundering activity described and the systemic instability created by DB's gargantuan derivatives book.
They mention DB financing some businesses related to Trump at the end of the article with no apparent connection with the rest of the story, I wouldn't ask for too much logic from a magazine like The New Yorker. Sometimes you feel that mainstream media has become like a 1950s western movie, where you've got the good guys on one side and the bad guys (Putin, Trump) on the other, with the Mexican boogeymen (terrorists) ready to pinch in at anytime.
Deutsche Bank's business is to facilitate financial transactions. They are not an arm of the government and their job should not be catching criminals. Imagine if a pharmacy was held liable for selling prescription drugs to clients who hold valid prescriptions. Unfortunately, banks are increasingly required to play this role, and this is not in the best interests of their clients. Thanks to FATCA, foreign banks already regularly refuse to serve American expats abroad. The end game of all this will be increasing fragmentation of the international financial industry and higher costs for cross-border commerce and trade.
The mechanics of the Russian trades in this case reminds me of another money-making scheme that I think would be highly profitable, if morally wrong.
It goes like this: You and your friend set up two separate managed funds, but the trades you make are the exact opposite of each other. When you sell USD and buy gold, your friend sells gold and buys USD. When your friend goes long GOOGL and short AAPL, you do the opposite. The size of the trades are managed such that after a year one of the funds doubles its assets under management and the other is wiped out.
Now instead of a strategy using 2 friends over 1 year, imagine a similar strategy involving 8 friends over 10 years. After a decade you have one fund that is up 700% (and 7 funds that are down 100%). You then advertise that fund to outsiders, taking a 3% commission on all assets under management. Since the fund has such stellar results its assets under management are bound to swell enormously, and that 3% is almost pure profit.
What happen to all the rubles the buyers paid Deutsche Bank to buy the stocks? Does the bank hold on to them? It seems the scheme cannot go on forever.
I don't know why you think the $54T is any less of a scandal. Just because the scope of the situation necessitated a different resolution doesn't mean the whole situation wasn't one of the biggest scandals of my lifetime.
> Meanwhile, the market capitalization of Deutsche Bank has become a grim Wall Street joke. This summer, Deutsche Bank, which is a hundred and forty-six years old, has been valued at about eighteen billion dollars—the same as Snapchat.
This is similar to the way Argentinians got money in and out of the country during 2001 and 2011. There's nothing nefarious about moving money you own.
It is well within the rights of a sovereign country to limit capital movements in or out of the said country, the same way the movements of a citizen can be legally limited if deemed necessary.
This is a really big deal. We should all be really worried that A/ folks in charge of this much of the economy are acting this way B/ our culture expects the taxpayers to bail these people out.
Bailouts are generally far between. The problem that enables your point /A is that the only thing that happens is that banks are fined in settlements. Since they keep doing these things, it must still be profitable, so the fines must just be license fees to act as they want. As such, the regulators profit from the fines; it's probably how the regulators' lawyers can afford to be paid, and they're probably mindful of that.
https://www.bloomberg.com/view/articles/2016-08-22/mirror-tr...
If you are into Michael Lewis like books, there is a good book called the Quants that follows the path of 5 people in finance. One of them is Boaz Weinstein who became the youngest director ever at Deutsche and whose group made over billion one year as derivatives traders. The bank has been cleaning up the mess he left ever since.
It failed last years banking stress test in no small part to Deutsche's involvement in the derivatives market. The IMF just named them as the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. So next time someone tells you that american banks are responsible for screwing up the world. Point them at the Germans and the Swiss :)
http://www.zerohedge.com/news/2016-06-29/imf-deutsche-bank-p...