Who is the real winner of minibond saga ?

last SG · 2008-10-24T01:05:48+00:00

LOL....go figure it out yourself lah. ok =P lawls~

jojobeach SG

i am not sure about this, but i've heard that the minibonds were offered to DBS treasures customers, = people with more than $200K assets under management. can anyone clarify? cos if it's true, it means that these people are actually quite rich in the first place.

now that this kind of thing has happened, it is normal for people to feign ignorance and absolve themselves from responsibility. im not saying that all of the people who lost their money in this fiasco are like that, but the smart thing to do would be to say you didn't know anything and that the bank relationship manager didn't explain everything to you.

So.. you're saying it's ok for the poor to feign ignorance and absolve themselves from responsibility ?

Dude.. do you know that the product may be marketed to people with bigger assets..

There's also the small time investors buying up the products ? These people are your grannies and grandpa with more than 200K RETIREMENT MONEY .... so they are not deserving of compensation ????????

What kinda screwed up logic is this ?

So punish the rich and save the poor... ? Hope you'd never ever get rich then dude.

jojobeach SG

life is never fair, if you haven't learnt it by now. it doesn't differentiate between losing 10K or losing 400K of your money. if you have someone to fight for you, good for you.. if not, it's perfectly normal.. it's not a right for people to compensate you whenever you are in a losing position..

Excwees mee... you know what is the meaning of misrepresentation ?

If a salesman convinced you that you are getting a cow.. instead you end up with a donkey at your door.. are you going to say you shouldn't be compensated for a refund?..

Wow wee... our world is a strange place to live..

maxtor SG

So.. you're saying it's ok for the poor to feign ignorance and absolve themselves from responsibility ?

Dude.. do you know that the product may be marketed to people with bigger assets..

There's also the small time investors buying up the products ? These people are your grannies and grandpa with more than 200K RETIREMENT MONEY .... so they are not deserving of compensation ????????

What kinda screwed up logic is this ?

So punish the rich and save the poor... ? Hope you'd never ever get rich then dude.

no. what im saying is that the richer people should have a higher sense of financial literacy and understand that there is no free lunch in the world. im still not sure if it was marketed to DBS treasures customers, that's what i've heard.

and when situations like this happen, the way to go is to feign ignorance and say that you didn't know this, you didn't know that. again, im not saying this applies across the board, but i would say its typical.

i've said that there is always a risk/reward ratio in investments. people tend to use at interest returns and tenure of investment as considerations, without considering the risk. on hindsight it would definitely seem 5% was not worth the risk taken, but 1 year ago no one would have expected a 158 year old investment bank to file for bankcruptcy.

dinky1409 SG

i think essentially here, if it is a case of misrepresentation, then perhaps, it is to be brought to the court and hence, it becomes a matter of rights. But right now, many people are putting across the point that retirees with life savings are at a loss and that they should be compensated, but on what grounds? It seems to me it is mere empathy and if empathy is good enough to earn you compensations in times of loss, wow, we just found a new way of hedging our risks.

However, if it is prove to be a case of misrepresentation, then its a different case altogether. The retirees might have a right to compensation.

maxtor SG

i agree that there definitely would be cases of misrepresentation and mis-selling. alot of the time bank relationship managers have their own interests at heart, not perfectly understand the product they r selling, etc. etc. but now EVERYONE is playing the same tune, claiming to have no knowledge about this product and it's risk. don't you smell a rat?

jojobeach SG

The only way to be certain is to look at the contract.

With the level of sophistication and how they repackaged the derivatives and what nots... I don't expect a whole lot of people to understand what exactly are they buying into.

The sales pitch probably shows some very favorably graph charts that shows very favorable past track records.. possibly during the subprime bubble...

People only see the arrow going up up ... ..

The sales people ain't gonna tell potential buyers the downside and the danger in the fundamental level....

Much like the Timeshares... have ya all forgotten how many got burnt with this "Great" product ?

maxtor SG

The only way to be certain is to look at the contract.

With the level of sophistication and how they repackaged the derivatives and what nots... I don't expect a whole lot of people to understand what exactly are they buying into.

The sales pitch probably shows some very favorably graph charts that shows very favorable past track records.. possibly during the subprime bubble...

People only see the arrow going up up ... ..

The sales people ain't gonna tell potential buyers the downside and the danger in the fundamental level....

Much like the Timeshares... have ya all forgotten how many got burnt with this "Great" product ?

I'm sure the contracts pretty much say the same thing. whenever bank customers buy a product, there's this form that customers sign indemifying the bank for any losses incurred.

i've heard that courts are usually more sympathetic to the customers in scenarios like these though.

walesa SG

the winners is Lehman Bros.

Do you know the real issue at hand here? Speaking of Lehman, have you the faintest idea on the gargantuan cost of settling Lehman's Credit Default Swaps (by institutions) in the industry recently? (This is a completely different issue to the minibond saga)

Back to the minibond saga.

How Lehman could be remotely culpable in this entire issue is beyond me. Just to clarify some issues which some folks without extensive knowledge might not get the full picture.

The minibond was a financial product structured by Lehman which other financial institutions (think your local banks like DBS in Singapore) around the world bought into and, in turn, sold to investors (the very people crying foul now). Hence, it makes perfect sense that the investors - whether justified or not - should go after whichever institutions sold them the product because ultimately, Lehman never dealt with these individuals (these small-time investors - by industry standards - would never get a look-in by Lehman to begin with). Clearly, financial institutions that bought the minibonds knew full well what they were buying into and, by extension, so should have been the retail investors who bought them from these financial institutions.

To drive home the point, imagine having a piece of toxic plastic manufactured by a factory in remote China that in turn sells it to Mattel which utilises it to manufacture toys. Now, should an end-user be poisoned for coming into contact with the toxic plastic, it would make perfect sense for them to go after Mattel (instead of the factory), wouldn't it?

maxtor SG

Back to the minibond saga.

How Lehman could be remotely culpable in this entire issue is beyond me. Just to clarify some issues which some folks without extensive knowledge might not get the full picture.

actually, i understand this abit differently. DBS, Hong Leong, and Maybank in this scenario acted as distributors on behalf of Lehmen Bros. Lehmen had these CDOs, in the form of securitised assets, and they were looking to sell them so they can get cash and re-leverage. In return for selling these MiniBonds, the 3 banks would get a distibutor's fee of about 0.5% of amount sold. (i'm not too sure about the exact amount)

in this scenario, to say that Lehmen is not culpable might not be entirely correct. But i agree with your Mattel scenario.

walesa SG

in this scenario, to say that Lehmen is not culpable might not be entirely correct. But i agree with your Mattel scenario.

So how is Lehman culpable? Are you for a moment suggesting they plotted and schemed their own bankruptcy? You might wish to figure how much it has caused the industry in settling CDS on Lehman following its collapse.

The fact that Lehman structured this product renders their position no different from a corporate bond issuer - any investor (be they institutional or individuals) knows full well (or at least, are expected to do so) the risk they are taking on.

Ironically, the flimsy case in this saga surrounds whether the retail investors (end-users who bought the product through a proxy and not through the originator) were mis-led. Clearly, in light of that, it's the intermediaries and proxies (in this case, the FIs that sold the product on to individual investors) who are accountable to the end-users who buy their product, and not the originator.

Are you therefore not ridiculously contradictory to suggest you agree with my Mattel scenario, but not Lehman considering Lehman never actually dealt with these individuals?

dukedracula SG

just wondering if these investors who were mislead had made money, will they be returning the profits to the banks?

it's quite subjective, it's like pressing a reboot button when things go awry....sure there are the less savvy and uneducated about such products...to claim miselling is totally inaccurate too, for institutions like lehman, who would have thought it would end up bankrupt? the sales rep probably just passd on their impressions too....assuming one were sold dbs minibonds years ago, the average sg citizen has huge confidence in the bank and should it suddenly go under, is this considered miselling when the buyer was told how solid the bank was then?

ispyyy SG

Real winner : Those who have bail out from Lehman's collaspe

It is like a musical chair game where everyone is fighting for a chair to sit after the economic booming melody stop.

Those who manage to get the chair will continue the game.

The number of players that wanted to play the game is much more than the number of chairs.

Some will say : I dont know I just follow everyone when the music start.

Some will say : How come they get to find a chair to sit down.

Some will say : I sit down first one, then, they squeezed me out.

Some will say : I saw the chair first one.

Ya... This is very common in games where the game organisers did not restrict the number of players.

Who is the real winner ? Those who bail out before economic boom melody.

waitrose SG

I really agree with dinky's and dukedracula point of view. To me, investment is like gambling. You place a bet hoping that the bet will win you something. Otherwise you lose. So you invest on something hoping that this something can give you profit. If not, then that's too bad.

If the banks have 80 million to spare, then they should have given it to those who really need it, i.e. the poor. I mean, if a person has 100K to invest, that means that this person must be well off. I don't believe that by investing 100K, this person has to live solely on bread everyday and stay in a one-bedroom HDB flat. And I am sure these people are not that stupid to put every single cent of their life savings in one basket. I am sure that after investing 100K, this person is still able to live comfortably. So sure, now this person is 100K poorer, but he is still able to live comfortably. So why should he be compensated just because he has lost his bet big time?

This 80 million is better off used in helping those who really has to eat bread everyday, who is really hit by the inflation such that even a 5 cent increase in bus fare is tough for them, who has difficulty making ends meet.

maxtor SG

Are you therefore not ridiculously contradictory to suggest you agree with my Mattel scenario, but not Lehman considering Lehman never actually dealt with these individuals?

Not really. The banks (DBS,MayBank,HL) were paid a distributor's fee by Lehmen to market the minibonds. In return, they would use their extensive branch network (and therefore their brandname) to sell these products to retail investors. When something like this happens, it's only fair that they partake in taking up responsiblility. That's where the Mattel scenario comes in. Customers would only naturally seek recourse with the 3 banks since these were the institutions they purchased the products from.

But to say Lehmen is not responsible is abit far off. Lehmen, being the creator of these products, should know full well the risks involved. Maybe they are not responsible to the retail investor, but that doesnt absolve them from responsiblity. This whole issue was created because of the lack of risk management and regulation, but i must admit that i say this with the benefit of hindsight.

maxtor SG

i think on average, local banks made about S$2 billion (in profits, not revenue) each last year. $80 million might look like alot on an absolute front but pales when you compare it to their annual profit.

walesa SG

You're either misguided or misled - I haven't got a clue where you got your lot of drivel from.

For the record, the minibonds were structured by Lehman Brothers and sold to retail investors worldwide via proxies. HSBC has been acting as the trustee (and not your simple "DBS, Maybank, HL were paid a distributor's fee by Lehman") for this product. If you haven't got a clue on the trustee's role in this whole affair, you might want to check out the following statement from Hong Kong's Securities and Futures Commission for starters : http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=08PR145 .

Even after ignoring some of the rather rational comments posted by someone above this post suggesting the investors wouldn't have refunded additional dividends had their investment yielded surplus returns, suggesting Lehman is even remotely responsible is downright ridiculous.

After all, if there is any misrepresentation and mis-selling on the end of the retail investors, it's conducted by the proxies (DBS, etc); in other words, Lehman never established any sort of direct contact with these investors. At best, it's these proxies who hold the moral obligation (whether this is substantial remains open to debate) to account to the retail investors since they knew very well the products they were dealing with.

Perhaps, using a more appropriate example. If you bought a desktop from Dell through a retailer to whom you would send it to for servicing during the warranty period (where the product is still effectively guaranteed by Dell), and Dell happens to become insolvent before your warranty expires and your desktop encounters problems during the remaining period of the warranty, are you for a moment suggesting Dell too is culpable of shortchanging you since they too, as the PC manufacturer, should be aware of the risks involved in the system breaking down?

4sg SG

I think one of the contributing factors is the ppl the bank hired as relationship manager.

The Straits Times article about a relationship manager recently. She is a fresh graduate from Arts and Social Sc and selling complex financial product.

4sg SG

the winners is Lehman Bros.

I don't think the winner is Lehman Bros. Remember, it has collapsed with 100s of millions in debts.

The real winners are the cheating American home buyers who collaberated and/or consipred to get easy home loan thru' false/fake - documentation, letter of credit, testmonials etc.

4sg SG

On Channelnewasia, Tan KL said the saga boils down to ethic. On TV, he can only say this.

For the past 7 to 10 years, there were periodic but frequent reports about the unethical, forced or pressured selling behaviour of the major banks. This issue never dies but surfaces again and again.

The repeated official lines from the authority were it has investigated the involving banks, found no breach of the law and has advised the banks to exercise care and caution. In other words, status quo.

These complaints, media report and letter to the press, were ample warning signs for MAS to clean up the act of these banks. Instead, MAS overlooking the re-occurrence nature of this issue and repeatedly claimed that enough has been done, enough check and balance has been in placed.

If the heart of issue is really about ethic or about global economy integration as some claimed, so be it – a disaster unavoidable. But if MAS had acted on these complains by supervising the banks more stringently, the result would be vastly different.

I disagree with those who said that the govt should not bear the responsibility for the loss, or at least part of this loss. Had our forever-claiming-to-efficient govt and MAS stepped in and intervened in a timely manner, the issue would not have been as it is now.

However, I also see another aspect to this saga. For MAS to admit that it has not been doing a good job, would open up a whole new political dimension.

LHL claimed that he would loosen up the political climate here. This would be a good test for him to put his word where his mouth is. But given our one party state, given our compliant media, given our no-question-ask citizen, this issue would never see the light of the day.

maxtor SG

You're either misguided or misled - I haven't got a clue where you got your lot of drivel from.

Yes. HSBC is the trustee. DBS, Maybank and HL are your distributors.

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