21–30 of 81 posts
I find that a bit surprising. I used to structure CMBS transactions before the financial crisis and even then all income from properties would be ticked back against the leases and the dataset verified by an independent auditor. In fact the CMBS market blew massive holes in banks balance sheets in 2008 but not because of fraud, but because the commercial property market tanked so much (and will likely not do much bet…
> Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage.…
> Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage.…
If the summaries were false or misleading, the bank may be liable for any loss occurred , as for the bankers this may be characterised as securities fraud. So the incentives are for the summaries to be accurate.
The whole idea of Adjusted EBITDA is insane to me. We add back "one-time," expenses and other items, but the underlying business ends up seeing similar "one-time," costs every year.
The result is that companies often borrow at a leverage ratio that looks 30% smaller than it actually is. This year we are doing "COVID-19," addbacks. What the fuck? You lost money because of COVID, so add it back to EBITDA so that you are still meeting your loan covenants? Lenders are in on it too, because they don't want to see their clients default and deal with bankruptcy or taking control of the assets.
Earlier quoted context omitted.
If the summaries were false or misleading, the bank may be liable for any loss occurred , as for the bankers this may be characterised as securities fraud. So the incentives are for the summaries to be accurate.
It should be noted that only one person was incarcerated from the fraud that occurred leading up to the 2008 GFC.
It’s sort of amazing how easy and widely accepted it is to submit, under oath, completely different corporate financial attestations depending on whether you are dealing with the IRS, the SEC, or FINRA. I can imagine 50 years ago, when they all got the ability to check electronically, and knew that everybody was cheating, but they couldn’t do anything because it would it would crash the economy, and also these comput…
50 years ago banking was a very personal business. A business would work locally with their own bank. The bank knew the owners and since they banked with them knew their cash flows. Now banks are national conglomerates. There is a lot of cost in banking and many of the large banks have moved to automated systems to reduce overhead and labor. This doesn't excuse the bank but they are permitting credit for all sorts of…
I don't know how to rein in the seemingly endless stream of schemers... and the thought that "everybody does it" (think LIBOR), and that shining the proverbial sunlight into the back rooms will cripple what financial system we have just makes me want to burn it all down anyway.
Lots of frustration, little action. No answers.
Earlier quoted context omitted.
It should be noted that only one person was incarcerated from the fraud that occurred leading up to the 2008 GFC.
I am aware of lot of losses that went back to the originating bank because of inaccurate marketing material.
No business with any company that employs even one of them, ever again. Starting today.
Damn the chaos, signal that this kind of profiteering and crash-building is not tolerated.