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More on stupid bankers
March 8, 2014 - Harry Eagar
A week ago, RtO had a nostaligic post ("This is where I came in," March 1) about the good ol' days when American bankers threw money away in Latin America. I noted that Citigroup, despite the billions it spends on corporate image-falsification, was unable even to get out 2 press releases that did not contradict each other.
Citi has done it again.
To recap, it looks as if Citi's big Mexican subsidiary was paying fake invoices for years and nobody noticed. The losses admitted so far are around $400 million, which in the modern money-of-account (no, not Bitcoin, silly, Solyndra), or one Solyndra.
A report today at Bloomberg News suggests that Citi doesn't object just to government regulation. It isn't interested in self-regulation either:
"Efforts by Citigroup Inc. (C) senior executives to tighten controls in Mexico were rebuffed by managers there for at least five years before the U.S. bank found the local unit had suffered a $400 million loan fraud last month, four people with direct knowledge of the matter said.
"Employees at Grupo Financiero Banamex SA process[ed] some documents by hand instead of using modern information systems that make it easier to detect flawed loans, said another person. . . .
"Banamex, Mexico’s second-largest lender, snubbed efforts to integrate systems with its New York-based parent and was slow to improve controls, technology and corporate governance, the four people said."
I am completely unsurprised, especially when we learn that Banamax was reporting very large profits. Nick Leeson, call your office. (Leeson was the trader who reported very large profits for Barings until it failed. I reviewed his book way back before there was an RtO.)
(For the record, RtO has no plans to write about Bitcoin. While amusing, it is insignificant. Nor was it, as some naifs in the business press have written, a Ponzi scheme. It was more like selling watered stock, if you want a financial comparison; but was really just a variation on the old gold brick con -- "I have this gold brick I want to exchange for cash, but I need your help. It is worth $10,000, and I will split 50-50, but you have to prove your sincerity by putting up $1,000. Thank you for the cash; here's your gold brick, wrapped in newspaper. Oh, look at the time. I gotta run. Good dealing with you."
(RtO estimates the residence time of government money deposited with Mt. Gox at under 10 minutes.
(I do not for one minute believe that the Mt. Gox losses were really a Solyndra. The amount of real assets moved into Mt. Gox was much less.)
What I love about the Bloomberg story (aside from the fact that Bloomberg is showing its usual tenacity) is the latest Citi press release:
“ 'We dispute assertions by anonymous sources peddling theories that the management team is somehow unaccountable or autonomous. While Banamex is a subsidiary of Citi, it is absolutely subject to the same risk, control, anti-money laundering and technology standards and oversight which are required throughout the company.' ”
Lord help us, I believe the second sentence is 100% accurate.
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