In Greece, meanwhile, 7,000 plainclothes police officers will be on duty when German Chancellor Angela Merkel visits Athens.

The Securities and Exchange Commission turned to a high-frequency trading firm to help build a system that will help the bank monitor high-frequency trading.

The market for municipal bonds is stuck in the dark ages, writes The Times' Gretchen Morgenstern.

Yoga-practicing, Bruce Springstein lover Barry Rosenstein, the founder of Jana Partners, is the activist investor you can bring home to mama in this profile.

Lehman Brothers' defunct brokerage is getting closer to paying creditors, four years after the firm went under.

Wall Street is anticipating lower corporate profits when companies begin reporting third quarter earnings, but that's not necessarily going to slow the stock market.

HSBC received a court order to bar Occupy protestors from entering its Hong Kong headquarters. The company evicted demonstrators in September after an 11-month occupation.

If only T. Boone Pickens had died ... Bloomberg Businessweek looks at Oklahoma State University's scheme to fund its athletic department by investing in life insurance policies on the program's boosters.

Would you work for Dominique Strauss-Kahn? Female executives are split on the question, according to Bloomberg.

A caddy at East Hamptons Golf Club, where memberships start at $400,000 and Goldman Sachs CEO Lloyd Blankfein is a member, has self-published a book about looping for the rich.

Spain is moving towards accepting European bailouts, even as protests in Madrid turned violent and politicians in the Catalonia region called for secession.

“It’s just amazing how Libor fixing can make you that much money or lose if opposite.” So said Tan Chi Min, a former Royal Bank of Scotland trader in a conversation with traders at other banks, in an affidavit reviewed by Bloomberg. “It’s a cartel now in London.” Tan is suing RBS in Singapore for wrongful dismissal after being fired for attempting to manipulate Libor.

SAC Capital hedge fund manager Michael Steinberg is said to be an unindicted co-conspirator in the government's insider trading case against hedge fund managers Anthony Chiasson and Todd Newman and technology analyst Jon Horvath. A Sept. 6 filing, prosecutors added four unindicted co-conspirators to their case; the names were blacked out in the filing, but one of the four was "the portfolio manager to whom Jon Horvath reported at his hedge fund." That person was Mr. Steinberg, according to unnamed sources cited by Bloomberg.

Part two of Reuters massive, massively awesome profile of Peregrine Financial Group founder Russell Wasendorf Sr., who pleaded guilty to stealing millions from clients at his Iowa-based futures brokerage. Part one is here.

Former Goldman Sachs programmer Sergey Aleynikov is suing the bank for $2.4 million in legal fees incurred while defending himself against charges that he stole code from the firm before leaving Goldman to join a high-frequency trading startup. Mr. Aleynikov was convicted by a federal jury in 2010, but won an appeal; he now faces charges in Manhattan.

Bureaucratic infighting has roiled government investigations into money-laundering charges at HSBC, according to Reuters.

Former UBS trader Kweku Adoboli told colleagues he was reporting fictitious trades, British prosecutors said. Mr. Adoboli is being tried on charges of fraud and false accounting over unauthorized trades on which UBS lost $2.3 billion.

Matt Levine on Securities and Exchange Commission charges against Hold Brothers On-Line Investment Services: "This is fundamental forces of some algorithms versus other algorithms, and each of those algorithms represents in some imperfect and abstracted way “supply and demand,” but not in a way a human could formulate in his mind or feel in his heart."

Germany is expected to enact legislation that would rein in high-frequency trading, according to The Times.

Have you heard the one about the British hedge fund manager (Crispin Odey) who's spending $210,000 on the stone to be used to construct a luxury chicken coop?

Last week, Citigroup chief executive officer went around telling everyone (read: The Financial Times and an audience in Singapore) that Citigroup didn't need to be broken up, as former Citi CEO Sandy Weill had argued last month. Mr. Pandit's media tour continued yesterday: Regulators telling banks which products they can sell undermines financial stability, somehow, he told Australian Broadcasting Corp.

Occupy Central protesters in Hong Kong face a legal deadline to leave HSBC headquarters, where the group has been protesting for 10 months, according to Bloomberg.

London-based investment bankers would rather work in Singapore than London or New York, according to a survey conducted by recruitment firm Astbury Marsden; 60 percent of those surveyed expect the Asia-Pacific region to be the world's largest financial center in 10 years.

Some European bankers are being asked to watch what they say at the bar.

Spain is expected to tap about $75 billion in rescue funding, about 60 percent of the facility approved by European finance ministers last month, The New York Times reports.

Blackstone adds another name to its succession plan; CEO Steve Schwarzman still expected to "die at his desk."

The Times takes a closer look at Luis A. Aguilar, the SEC commission who scuttled the agency's attempts to impose new rules on money market funds.

Nomura is getting ready to slash jobs in equities and investment banking, according to Reuters.

Deutsche Bank introduced rules that allow it to claw back shares bestowed on employees in return for unvested stock awarded by their previous employer, the Financial Times reports. Other banks may follow suit.

A producer for The Wolf of Wall Street, which stars Leonard DiCaprio as a crooked stockbroker, is suing the film's production company for reducing her role behind the scenes, The New York Post reports.

Chinese investors are buying up Bordeaux vineyards.

Mutual funds run by Morgan Stanley are showing hefty stakes in Facebook, The Wall Street Journal reports, and while many of those shares were acquired pre-IPO, allowing the funds to show paper gains despite Facebook's fallen stock price, investors in the funds are at risk of further Facebook losses.

HSBC is talking settlement with U.S. regulators over charges the bank violated sanctions against Iran and Sudan among other nations. The bank set aside $700 million for the matter in July.

Bank of America's four new directors are typical bank-director types, Bloomberg reports, perhaps indicating that BofA thinks it's on the right path, definitely indicating that the train has left the station on our dream of shaking up the North Carolina-based bank from inside the boardroom.

Citigroup's private banking unit withdrew $410 million from John Paulson managed hedge funds, a lot of money, no doubt, but as sharper wits than ours have pointed out, so long as Mr. Paulson himself doesn't send a redemption letter to a certain hedge fund located at 1251 Avenue of the Americas, Paulson & Co. should be okay.

SEC Chairman Mary L. Schapiro through down her arms in the effort to rein in systemic risk posed by money-market funds. The Times says the Treasury might take up more powerful weapons.

The case of Vietnamese banker Ly Xuan Hai shows once again that it's safer to be a crooked banker in the west than the east.

A top German politician said that the Greek bailout plan can't be renegotiated. Though history tells us there can't be a renegotiation until in fact there is. Elsewhere, is Finland the forgotten frontier in a potential eurozone breakup?

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.

Libor-ated: Barclays CEO Bob Diamond maybe wishing he could take a mulligan on his July 4 appearance before Parliament's Treasury Select Committee. Last week, an email from the British Financial Services Authority to Barclays chiding the bank for pushing the envelop in its dealings with regulators had lawmakers calling Mr. Diamond a liar. Yesterday, it was Jerry del Missier, Mr. Diamond's top lieutenant before resigning earlier this month, who seemed to contradict Mr. Diamond's testimony.

Lax compliance: HSBC did business with Mexican drug cartels, Saudi banks with terrorist ties and Iranians under U.S. sanctions, according to a 335-page report released yesterday by the Senate Permanent Subcommittee on Investigations, as the firm allowed compliance problems to 'fester.' Executives from the lender are scheduled to testify before the committee today.

Future of futures: The Commodity Futures Trading Commission conducted reviews at PFGBest, the Iowa-based futures broker facing allegations that it's missing more than $200 million in client funds, in 2007 and 2008, but failed to uncover the fraud that has landed the firm in liquidation, Bloomberg reports. That's despite the fact that PFG founder Russell R. Wasendorf said that he has been falsifying records for 20 years in a note written before his attempted suicide last week. The National Futures Association—PFG's regulator—is conducting a review of its audit division.

Whiter Europe: Moody's cut ratings on 13 Italian banks after downgrading the country's sovereign debt last week. Is Italy just Spain with better PR?

Chief Yahoo: Former Google executive Marissa Mayer was named CEO at Yahoo yesterday. Ms. Mayer told Forbes that she's pregnant; it sounds like Dan Loeb would have been informed.

Criminal incubators? A professor at University of Chicago's Booth School of Business asks whether MBA programs can do better when it comes to teaching ethics.

Slum lords? U.S. Bank is failing to maintain hundreds of foreclosed properties, according to an enforcement action filed by Los Angeles city officials. Memphis Tennessee, Baltimore and Maryland have previously sued banks over the cots of maintaining foreclosed properties.

Hot property: Private equity firms are competing to buy Dick Clark Productions, The New York Post reports.

From This is Money:

HSBC has tested its cash machines in Greece to check whether they could cope with the reintroduction of the drachma if the country drops out of the euro.

...

An HSBC spokesman said: ‘Like all banks, we have been working with regulators to undertake preparatory work at multiple levels in the event of a sovereign default, an exit from the euro, or any other eventuality.’

...

The cash machine tests at branches in Athens are understood to have been extensive to ensure that the machines are able to handle banknotes of a different size and texture.

The short-story: Reuters got hold of a draft letter from U.S. attorney William J. Ihlenfeld II to justice department officials alleging HSBC had created an anti-money laundering operation that was a "systemically flawed sham paper-product designed solely to make it appear that the Bank has complied."

HSBC staffed its U.S. anti-money laundering unit with "gullible, poorly trained, and otherwise incompetent personnel," the letter alleges, and also ignored thousands of internally generated alerts and failed to forward legally-mandated notifications to law enforcement.

It gets worse. In 2009, the Office of the Comptroller of the Currency determined that the HSBC executive in charge of installing a program to monitor suspicious retail transactions was incompetent. The next year, a Miami-based HSBC banker brought suit against the bank, alleging that he was fired on sexual harassment charges after he warned colleagues that lucrative private bank clients had violated U.S. trade restrictions with Iran and Cuba.

HSBC has been upfront about regulator interest, and told Reuters that it's cooperating with investigations. The lender disclosed in November that it had entered into consent orders regarding its anti money-laundering and Bank Secrecy Act compliance. (Excerpt: "It is likely that there could be some form of formal enforcement action in respect to some or all of the ongoing investigations.")

The devil of the Reuters story, of course, is in the details. In the draft letter reporters obtained, U.S. attorney Ihlenfeld compared HSBC to Riggs Bank, which was fined $41 million in 2004 and 2005 for violating money-laundering laws.

"HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill," wrote Ihlenfeld.

As was the case with Mr. Picard's lawsuit against JPMorgan Chase, the allegations are fairly serious. The Financial Times reports that Madoff issued statements to the bank that included some assertions that might have been cause for some suspicion:

Among other things, the statements included claims that Mr. Madoff was parking investors' cash in a money market fund that ceased to exist in 2005, that trades had settled on non-working days, and at prices outside the reported daily price range.

With this kind of evidence laying around for years before Madoff got caught, it's no wonder the fraudster said it was "amazing" that the Securities and Exchange Commission didn't catch him sooner.

mtaylor [at] observer.com | @mbrookstaylor

mtaylor [at] observer.com | @mbrookstaylor