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July 13, 2017 By Richard Bowen

Is Wall Street a National Threat?

A sentence in a recent NY Times editorial captured my immediate attention:

“But the American Public Is short of memory and naively susceptible to the siren song of snake oil.”

In its first system-wide “all clear” since our last financial crisis, “the Federal Reserve announced last week that all of the nations’ big banks are healthy.”

The Times expressed scepticism. Yes, the banks may, in fact, be healthier than when the Fed started implementing annual stress tests that evaluated how banks would withstand financial and economic downturns. However, and it’s a big, however, the present health of today’s banks are in large part due to the banking reforms that were put in place after the crisis to improve lending practices and restrict bank trading practices.

Ironically these same standards, which led to today’s more stable financial system are under heavy fire. Our present administration believes “regulation has impeded bank lending and by extension, economic growth.”

It appears that what is being touted is “a return to the days when excessive risk- taking led to outsize profits.” According to the Times, in part, deregulation led to the financial crash of 2008.

Well, that’s just part of the story. It was also the unprecedented greed and the sub-prime lending and derivatives gambling which fueled it. The system may not be anywhere near as robust as the Fed’s claim. It would be foolish to assure that our banks are prepared to withstand another financial crisis of the magnitude of 2008 or a lengthy recession.

The Fed’s good grades on stress tests mean our banks have the capacity to now engage in financial engineering to increase their stock price through stock repurchases and substantially increased dividends. Loosening standards pave the way for the same gambling we saw before.

History does repeat itself. Not that long ago I wrote about Congress trying to reinstate controls on the TBTF to re-establish the separation between commercial and investment banking and assuring that a firewall stays in place. Do we want banks to once again be allowed to trade in complex derivatives and swaps? Or, engage in hedge fund and private equity activities?

Folks, let’s not forget that banking is “the only industry in the United States that has twice in a period of less than one hundred years brought about a devastating economic crisis,” according to an editorial by Pam and Ross Martens in Wall Street on Parade.

According to the Martens, the Times editorial was not strong enough and did not take their editorial warnings far enough. The authors believe Wall Street should be viewed as a “major threat.”

If the TBTF banks get their way and influence Congress to weaken some standards and regulations, we are headed for another potential disaster. Derivatives and other risky lending practices could once again lead to a breakdown in our economic system.

Dodd-Frank is under fire including its many provisions which were a check on Wall Sreet. Banks were forced to move derivatives out of the bank with insured deposits so that government insured depositors’ money couldn’t be gambled with and requiring derivatIves would all to be centrally cleared, eliminating much of the individual counter-party risk.

Citigroup, who got the Dodd-Frank bill gutted, thereby removing the prohibition of funding derivatives with bank deposits, had $41.3 trillion in notional derivatives in March of 2008. Today they are up to $54.8 trillion which, as the Wall Street on Parade article points out, is equal to 72% of the world’s total GDP! With only a small part of the derivatives being centrally cleared.

And the TBTF concentration is huge, with the largest four of the TBTF having more than 89% of the total banking industry notional amount (face amount) of derivatives, according to the Office of the Comptroller of the Currency (OCC) in their trading and derivatives report which covers the first quarter of 2017. The report also shows that less than 40% of the banking industry derivatives are centrally cleared.

So, what are we thinking? How quickly we forget.

Optimism is fine but not the recklessness which could once again result in millions of people being financially devastated.

The past proves big banks need some oversight. Carte blanche on fewer regulations encourages risky gambling and will have dire consequences.

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Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

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What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59+00:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
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Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19+00:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
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~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26+00:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
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Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17+00:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
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Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06+00:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://www.richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50+00:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://www.richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22+00:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://www.richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

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Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

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