Why he did it: PFGBest Founder Russell R. Wasendorf, who was arrested last week on allegations that his futures brokerage was missing more than $200 million in client segregated funds, wrote that he misappropriated funds to meet increasingly stringent regulatory requirements, according to The Wall Street Journal. (Sort of like the Stuyvesant High Seniors who cheated on Regents’ exams because they were under so much stress.) The Journal’s reporting is based on previously unpublished portions of the note Mr. Wasendorf left behind when he attempted suicide earlier this month. “I have to say I don’t feel bad about deceiving the regulators,” the note said. “They made the decision to be my enemy.”
Fools! The trial of former mid-level Citigroup employee Brian Stoker for his role in creating and marketing mortgage-backed securities that the government says were designed to fail won’t satisfy the public’s appetite for convictions arising from the financial crisis, writes Steven M. Davidoff in The Times. The trial is more likely to show “how clueless financiers can be.”
Showed himself the door: HSBC chief compliance officer David Bagely resigned in the middle of his testimony at the Senate Permanent Subcommittee on Investigations yesterday, during which executives apologized for the lax oversight that allowed the bank to do business with sanctioned countries such as Iran, organizations with terrorist ties and Mexican drug cartels.
Profits down: Goldman Sachs’ net income fell 12 percent in the second quarter of 2012, as trading profits lagged. The results still beat analysts estimates, which were lowered sharply in the weeks leading up to yesterday’s announcement. The firm said it would seek to cut $500 million in expenses to make up for lower revenue. Meanwhile, Goldman reached a class-action settlement with investors in a $698 million mortgage backed securities offerings, according to Bloomberg.
BofA next: In addition to Goldman, JPMorgan and Citigroup also announced lower second-quarter profits. Bank of America will release results today, with some analysts expecting the bank to show a profit after losing money in the same period last year.
Libor-ated: Bank of England boss Mervyn A. King told Parliament that the Federal Reserve Bank of New York shared recommendations on how to improve the Libor-setting process, but never mentioned that a Barclays employee had told FRBNY that the bank was low-balling Libor submissions to protect its share price.
City of Compton…Is on pace to run out of cash to make payroll on Sept. 1, and may join the growing group of California municipalities to declare bankruptcy, Reuters reports. Stockton, Mammoth Lakes and most recently, San Bernardino have said they will file for bankruptcy.
Want to see mad? Pay an investment-banking analyst a bonus that’s 20 to 40 percent less than his peers.