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Credit Suisse First Boston Fined $100 Million
A couple of people wrote in to note that Credit Suisse First Boston, which was the underwriter for VA Linux ? ' IPO, has been fined $100 million for actions they took in that and other high-tech IPO's during the stock market boom. CSFB allocated shares of certain IPO's to customers who made kickbacks to CSFB. Here's their side of the story. There's also an additional statement by the regulators and CSFB's settlement agreement (PDF).
When confidence dries up in enterprises that borrow money, risk is perceived to increase and people that hold assets are less likely to lend it out, decreasing liquidity. Less liquidity means less money available for investment, which is the primary negative effect on the economy as a whole when things like Enron and this IPO thingy happen.
A government can try to increase liquidity through a number of means, reducing risk by buying off bad loans so troubled banks will be more likely to lend money, issuing more currency, and buying back government bonds are a few of the tools available to governments. Many people think Japan's only way out of its current recession is to bail out its banks, many of which have a bunch of bad loans on the books and are very adverse to new loans, thus preventing GDP growth since new businesses and business expansion is driven through bank loans (as well as stock.)
personal attacks hurt, especially when deserved
Not that I agree with this argument, but I've heard it posited that if a person isn't a danger to society, his crime should ideally be punished with fines rather than jail time since putting someone in Jail who could be creating wealth creates waste.
Of course, if these people had to take responsibility for their lilly white asses and spend their time in a real max security jail cell this shit wouldn't happen. Either that, or you'd have prison reform really quick.
___
It's the end of my comment as I know it and I feel fine.
im sorry, but if you have ALL of your retirement savings invested in ONE company, then you are a moron.
you should know rule #1... DIVERSIFY!
no
Because the "charge" involved a violation of SEC and NASD regulations, not a criminal charge (e.g., Murder.) The $100m is a combination of "disgorged profits" (you have to love the legalese) and a fine.
This has nothing to do with "the Swiss" -- CSFB is a multinational.
It's Linux, damnit! Pay no attention to renaming attempts by self-aggrandizing blowhards.
As a former Bank manager in Austin.
If you were a former bank manager in Austin, and you didn't know how these things worked, then either you worked at a blood bank, or I should move my money somewhere else.
It all has to do with the fact that we, as a society, are willing to assign wealth to unrealized assets (unsold stocks, options, bonds, etc..). And when the value of the unrealized assets drops, we perceive a decrease in the wealth of the individual that holds them.
For example, I would guess that our good friend Bill Gates probably has somewhere in the 20 - 30 million dollar range of true assets (this would include his houses, trust funds, cars, wife's jewelry, greenbacks in his wallet, gigantic money vault in which he swims, etc..) However, we peg him at $74.645400 billion because he holds somewhere in the area of 141 million shares of Microsoft (plus holdings in other areas). So when the stock price of Microsoft tanks tommorrow morning on news of the AOL suit (from $66 down to about $60), then we would say that Gatesy-boy had "wealth evaporation" of $846 million dollars. However, he still has his houses, cars and wife's jewelry - so his assets have not changed, just his potential.
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The extraordinary thing about this is how lightly CSFB (and the street as a whole) is getting off. The profits from inappropriate IPO allocations alone substantially exceeded the penalties.
No penalties will ever be assessed against the hundreds of analysts who hyped internet stocks in exchange for those companies giving their firms a slice of the investment banking business.
Ask any analyst from any wall street firm, sell side or buy side, and they will tell you that everybody does this. Compare the SEC's treatment of big firms doing outwardly crooked things to their treatment of the little guy.
It looks like they're too busy busting 15-year olds to attack the real stock manipulators.
An agreement between two people requires a promisary note - very common years ago. When a pig rangler wanted to get milk from the cow herder he would exchange a promisary note - "This note is good for one pig [signed]".
The cow herder could keep the note and get a pig when he saw fit. Or he could trade the note for other goods/services.
Perhaps a man of status wouldn't trade stock, he would commit 3 squads for 3 weeks to another. The notes could be traded. In time notes were signed by the King to be worth a certain ammount. Those who didn't see value in the pieces of paper didn't involve themselves with it. Those who did see value desired the notes.
Eventually it makes sense to put numbers to your notes. Trying to exchange a note for 15 head of cattle is difficult. But 15 dollars can be broken up into it's parts.
Then Kings produced more notes. The corrupt Kings knew they couldn't cash in the value - but, back in the real world, they didn't have to. They promised more to more people and the value of a note dropped. They stopped handing out duplicate notes and the price rose. They made laws so that they were the ones who controlled this.
Simply said, money is an evolution of promisary notes. Nothing much more, nothing much less.
And believe me, I know.
--Giving to trolls for the benefit of us all
The wealth DOESN'T evaporate. Stock is a medium between cash and physical assets. When you start a sole proprietorship, you invest in the business by buying things like desks and chairs and employee salaries out of your own pocket. Your return on investment (revenue-expenses=profit > /dev/pocket) is analogous to dividends. Now, move up to a partnership. Same thing basically, but multiple investors and therefore votes on how that investment is spent (ideally anyway). Next, jump to a corporation: EXACT same thing as a partnership with these mere differences: you're only limited to what you explicitly invest, you can't actually sell off what you invested in (only the holding on it, the stock - unless you get a majority of voting shares to agree), and it's possible to not have a controlling interest. That's what stock is, and yes - you needed to know it to understand what follows.
Here's where people get confused: Stocks are an asset like anything else. My computer is an easy example. I may consider it to be worth $5k, but Bob might only be willing to stick $3k for it. People, expecting a return on their investment, will be willing to pay just so much for something. Stock prices are basically the price of what people are willing to pay to buy the all the stock, just as my Linksys router is as high a price as the manufacturer can get away with. Somebody might be willing to sell me one for only $50, or I may decide to hoard as many as I can and people seeing an opportunity in this will offer it for $200, which I might be willing to pay for it. Now, what if tommorow a major unfixable bug was discovered in all the linky's that the manufacturer couldn't fix and wouldn't replace? Now nobody is willing to pay for them. I'm basically out what I spent. Now this is what almost nobody understands - I DIDN'T LOSE THAT MONEY, I spent it like I would on anything else. Whoever sold me that stock (the linky) got $X dollars. I've already lost it. It didn't evaporate, it just changed hands. Look above to understand how the supposed "value" of a stock fluctuates, but it's really nothing more than what other people value it at.
So, why do people become "broke" if they've already parted with their money? Imagine taking out a loan on your car. Because your car is an asset, you can have equity on it. No more than what other people value it at (Blue Book being the definitive guide here), but it's there. People use equity on their stocks just like they do on their car. But if you crash the car... you know what happens. Equity in a stock is just the same thing - only it's not on what you own, it's on what the business owns. Just like if I opened a convenience store and took a mortgage on the building.
SIG: HUP