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I wrote my feelings about how Deutsche got into this mess here. I think its still a valid take on how things unraveled. https://news.ycombinator.com/item?id=1

I wrote my feelings about how Deutsche got into this mess here. I think its still a valid take on how things unraveled. https://news.ycombinator.com/item?id=13047056 https://news.ycombinator.com/item?id=13047056 > Essentially, the trade had little economic purpose—only an accounting one. Yep, that's one of the first things you learn about when you take any kind of trading course. At a lower level in the cash equity markets you have something similar with wash trades. The rule of thumb has always been, did you swap any risk, if not then consider you may have done something dubious, not always, but its a very good first pass. > This month the bank agreed to pay $7.2 billion to resolve a U.S. probe into its subprime mortgage business, admitting it misled investors. Deutsche has paid more than $9 billion in further fines and settlements related to claims of tax evasion; violating sanctions against Iran, Libya, Syria, Myanmar, and Sudan; rigging the $300 trillion Libor market; and other alleged breaches of the law. I think this is going to be the new normal for banks from now on until they get completely out of trading an market making, which is probably going to be never. It's very hard to police a world wide distributed teams, who have many conflicting views, all of who get paid based on what they produce and don't have much long term incentive to see things any other way. I mean, in this case even the risk team singed off on it. What more could a CEO do. At some level you have to trust your people to make money and do it without breaking the laws of every country you do business in, even if those laws can conflict. Having said that, Deutsche bank is one bank that keeps coming up when fines and abuse in the baking system are in the news. They allegedly wrote famed hedge fund Renaissance Technologies their infamous basket option put that let RenTech claim that its short term trades were actually long term captial gains instead by virtue of them owning the put written by the bank that just happend to include every single short term trade Rentech did over the year. Deutsche got paid handsomly for writing the put and RenTech got the cliam long term capital gains vs short term capital gains. https://www.bloomberg.com/news/articles/2014-07-21/renaissance-avoided-more-than-6-billion-tax-report-says https://www.bloomberg.com/news/articles/2014-07-21/renaissan... Side Bar: I've said this before, but when the tell all book about RenTech is written, their genius will be confirmed but I think you'll find they did alot more shady things like the above to juice their returns.

rhizome 10y ago
At some level you have to trust your people to make money and do it without breaking the laws of every country you do business in, even if those laws can conflict. I have the sense that in many of these cases, the laws actually don't conflict. That is, they did things that are illegal in every country they do business in, and that's without even touching SarbOx.
bogomipz 10y ago
>"It's very hard to police a world wide distributed teams, who have many conflicting views, all of who get paid based on what they produce and don't have much long term incentive to see things any other way." Why is this hard for management to police their own departments? Other industries manage distributed teams just fine. I agree with your other points in that passage. The real issues is that there exists a culture a criminality with little little fear of consequences. jail. The only way that's going to change is to start holding individuals accountable. >"I mean, in this case even the risk team singed off on it. What more could a CEO do?" Verify? These CEOs have insane compensation packages. They make more in a year than most people will in a lifetime. When questions about their insane pay packages arise, the party line always seems to be that they are worth it because they are "that good." If they are that good then more should be expected of them. They should be conducting independent audits - "trust by verify" or do some innovating in the area of compliance. Their M.O. is always to blame someone else, the buck never stops with them.
- mikeash 10y ago
  Companies don't want to police their own departments. This is how lots of modern companies deal with laws they don't like. They commit to obeying the law, tell everybody not to do anything illegal, but at the same time place requirements and expectations on the peons that force them to break the law. Then the peons get caught, they tell everybody how it's not their fault, they told everyone not to do that. The peons get fired or worse, the company hires replacements, tells them not to break the law, gives them unrealistic expectations, and the cycle repeats.
  - Cerium 10y ago

rhizome 10y ago

At some level you have to trust your people to make money and do it without breaking the laws of every country you do business in, even if those laws can conflict. I have the sense that in many of these cases, the laws actually don't conflict. That is, they did things that are illegal in every country they do business in, and that's without even touching SarbOx.

bogomipz 10y ago

>"It's very hard to police a world wide distributed teams, who have many conflicting views, all of who get paid based on what they produce and don't have much long term incentive to see things any other way." Why is this hard for management to police their own departments? Other industries manage distributed teams just fine. I agree with your other points in that passage. The real issues is that there exists a culture a criminality with little little fear of consequences. jail. The only way that's going to change is to start holding individuals accountable. >"I mean, in this case even the risk team singed off on it. What more could a CEO do?" Verify? These CEOs have insane compensation packages. They make more in a year than most people will in a lifetime. When questions about their insane pay packages arise, the party line always seems to be that they are worth it because they are "that good." If they are that good then more should be expected of them. They should be conducting independent audits - "trust by verify" or do some innovating in the area of compliance. Their M.O. is always to blame someone else, the buck never stops with them.

mikeash 10y ago
Companies don't want to police their own departments. This is how lots of modern companies deal with laws they don't like. They commit to obeying the law, tell everybody not to do anything illegal, but at the same time place requirements and expectations on the peons that force them to break the law. Then the peons get caught, they tell everybody how it's not their fault, they told everyone not to do that. The peons get fired or worse, the company hires replacements, tells them not to break the law, gives them unrealistic expectations, and the cycle repeats.
- Cerium 10y ago