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Documents Emerge in Senate Hearing from William Broeksmit, Deutsche Exec Alleged to Have Hanged Himself in January

OWoN: Yet another Banker takes the walk of shame.

From left, Martin Malloy, managing director at Barclays Capital Inc.; Satish Ramakrishna, global head of prime services risk at Deutsche Bank Securities Inc.; Mark Silber, executive vice president, chief financial officer, and chief legal officer at Renaissance Technologies L.L.C.; and Jonathan Mayers, counsel at Renaissance Technologies L.L.C., are sworn in at a Senate subcommittee hearing in Washington. ANDREW HARRER / Bloomberg

Wall Street On Parade
By Pam Martens
and Russ Martens
23 July 2014

Anshu Jain, Co-CEO of Deutsche Bank, was not having a good day yesterday. First the oath-taking, subpoena-issuing Senate Permanent Subcommittee on Investigations released a detailed email to him from William Broeksmit, the 58-year old former Deutsche risk executive alleged to have hanged himself in his London home on January 26. By the end of the day, someone had leaked to the Wall Street Journal a deeply critical letter of Deutsche Bank from the New York Fed which said that “The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action.”

What the U.S. Senate’s Permanent Subcommittee on Investigations was taking testimony on yesterday, however, was far from an “error” committed by Deutsche Bank. Both Deutsche Bank and Barclays were shown, through emails, marketing materials and witness testimony, to have set up elaborate schemes to effectively loan out their balance sheet to hedge funds to conduct billions of trades each year in trading accounts under the bank’s name, deploying massive leverage that is illegal in a regular Prime Brokerage account for a hedge fund client.

The banks got paid through margin interest, fees for stock loans for short sales, and trade executions. The hedge funds got paid not only from trading profits but also through a tricked up “basket option” offered by the banks that magically turned millions of short-term trades into long-term capital gains, saving the hedge funds about half the rate of taxes owed on the short-term trades, some of which lasted only minutes.

One hedge fund, Renaissance Technologies, was said by Senator John McCain to have ripped off the U.S. taxpayer to the tune of $6 billion in unpaid taxes on long-term capital gains.

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